Italian Managers: Fidelity or Performance?

Abstract

Is there a link between Italy’s disappointing productivity growth and the way Italian firms select and develop managerial talent? We collect extensive information on the characteristics of Italian managers and of the firms that employ them. In particular, we analyze the incentive structure that managers face, their career profile, and their use of time. Our data indicate that a fraction of firms – especially non‐family firms and multinationals – adopt a performance model, whereby managers are hired through formal channels (business contacts, head‐hunters, ads), they are assessed regularly and rewarded, promoted and dismissed on the basis on the assessment results. Other firms – especially family firms and firms that operate on the national market only – instead adopt a fidelity model of managerial talent development: they hire managers on the basis of personal or family contacts, they do not assess their performance formally, and they reward them based on the quality of their relationship with the firm’s owners. The managerial model adopted by a firm is significantly associated with the quality, behaviour, and performance of its managers – as well as the performance of the firm itself. Managers who work for firms that reward performance tend to be more educated and less

Full text

1

ItalianManagers:FidelityorPerformance?
OrianaBandiera,LuigiGuiso,AndreaPrat,RaffaellaSadun1
16May2008

Abstract:IstherealinkbetweenItaly’sdisappointingproductivitygrowthandtheway
Italianfirmsselectanddevelopmanagerialtalent?Wecollectextensiveinformationonthe
characteristicsofItalianmanagersandofthefirmsthatemploythem.Inparticular,we
analyzetheincentivestructurethatmanagersface,theircareerprofile,andtheiruseof
time.Ourdataindicatethatafractionoffirms–especiallynon‐familyfirmsand
multinationals–adoptaperformancemodel,wherebymanagersarehiredthroughformal
channels(businesscontacts,head‐hunters,ads),theyareassessedregularlyandrewarded,
promotedanddismissedonthebasisontheassessmentresults.Otherfirms–especially
familyfirmsandfirmsthatoperateonthenationalmarketonly–insteadadoptafidelity
modelofmanagerialtalentdevelopment:theyhiremanagersonthebasisofpersonalor
familycontacts,theydonotassesstheirperformanceformally,andtheyrewardthembased
onthequalityoftheirrelationshipwiththefirm’sowners.
Themanagerialmodeladoptedbyafirmissignificantlyassociatedwiththequality,
behaviour,andperformanceofitsmanagers–aswellastheperformanceofthefirmitself.
Managerswhoworkforfirmsthatrewardperformancetendtobemoreeducatedandless
risk‐averse.Theyworklongerhours,buttheyarepaidmoreandtheyreporthigherlevelsof
jobsatisfaction.Firmsthatuseperformance‐basedincentivesgrowfasterandhaveahigher
returnoncapital.Whilethefidelitymodelappearstohaveworseoutcomes,thereappears
tobenogenerationalshifttowardstheperformancemodel.
1 IntroductionandSummaryofFindings
FromtheendoftheWorldWarIIuntiltheendofthe80s,theItalianeconomicsystemwasmostlya
successstory,outperformingmostotherdevelopedcountries.Forinstance,between1975and1995
hourlylabourproductivityinmanufacturinginItalygrewatanaveragerateof3.6%.Inthesame
periodUSmanufacturingproductivitygrewat1.8%.However,since1995thereisnodoubtthatItaly
hasdoneworsethanmostotherdevelopedcountries.Inthatperiod,thehourlylabourproductivity

1ThisresearchisfundedbyFondazioneRodolfoDebenedetti.WethankNickBloom,TitoBoeri,DanielFerreira,
GuidoFriebel,LuisGaricano,BarbaraPetrongolo,StevePischke,FabianoSchivardi,andJohnVanReenenfor
usefuldiscussions.WearegratefultoEnricoPedrettiforhishelpwiththeManagerItaliaSurvey,toValentina
AdornoandPaolaMontiforhelpwiththeINPSdatabase,andtoanumberofpeopleatFondazione
DebenedettifortheirhelpwiththeCEOtimeusesurvey.

2
inmanufacturinghasactuallydecreased,while,forinstance,intheUSithasincreasedatanaverage
rateof3.1%.
OnecantrymanyavenuestoexplainwhyItalyhasbecome“TheSickManofEurope.”Inthispaper
weinvestigatethepotentialroleofoneproductivefactor:managerialtalent.Thereisagrowing
consensusthatthepresenceofcapableandmotivatedmanagersisanimportantingredienttothe
successofaneconomicsystem.ThereissomeevidencethatItalianfirmsmaylagbehindthoseof
othercountriesinthewaytheynurtureanddevelophumancapital(Bloometal2008).Thegoalof
thisworkistoanalysetheincentiveschemesadoptedbyItalianfirms,andtheireffectonmanagerial
selection,effort,managerialstyleandultimatelyfirmperformance.Tothispurposewehave
designedandimplementedtwonewsurveysofmanagersandtopCEOs.
Ourkeyhypothesisisthattherearetwomodelsofmanagerialcareerdevelopment:aperformance
modelandafidelitymodel.
Intheperformancemodel,managersarehiredonthebasisoftheirexpectedperformance,basedon
allavailablesignals(education,successinpastjobs,etc).Theirperformanceisassessedregularlyon
thebasesofpre‐determined,measurableoutcomes.Assessmentsareusedtodeterminethebonus
theyreceive,whichisasignificantpartoftheircompensationpackage,andtomakepromotion
decisions.Managerswhosystematicallyunderperformaredismissed.
Inthefidelitymodel,thereisinsteadanimportantrelationalcomponent.Ratherthanfocusingon
pre‐determinedoutcomemeasures,themanagerisexpectedtoimplementfaithfullythefirm
owners’wishes.Managersarehiredonthebasisoftheirexpectedfidelity;hence,directpersonal
knowledgeishighlyvalued.Objectiveperformancemeasuresareusedlessoften.Instead,managers
arepromotedordismissedonthebasisofthequalityoftheirrelationshipwiththeowners.
Ofcourse,nofirmusesapureformoffidelitymodelorapureformofperformancemodel.A
personalrelationshipcomponentisalwayspresent,evenforpositionswithhighlymeasurable
outcomes.Aperformancecomponentisalsoalwaysthere:eventhemostdictatorialownerislikely
torewardtalent.However,aswewillsoonshow,thefidelity/performancemodelwillbeableto
offeraconsistentaccountofwhatweseeinthedatawehavecollected.Inparticular,wewilluse
ourmodeltoaskthefollowingresearchquestions:
Question1:HowareItalianmanagersselected?Howaretheyassessed?Howaretheyrewarded,
promotedanddismissed?
Question2:Arethepoliciesweobservemoreconsistentwithafidelitymodeloraperformance
model?Whichfirmsaremorelikelytouseafidelitymodel?
Question3:Whatdothetwomodelsimplyabouttheselectionofmanagerialtalent?Whatarethe
characteristicsofmanagersthattendtoworkinfidelity‐basedfirms?Dotheyputmoreorless
effort?Howdotheyusetheirtime?
Question4:Doesthechoiceofthemanagerialpolicymodelexplainfirmperformance,bothinterms
ofgrowthandreturnoncapital?
Question5:DoItalianfirmsrelymoreonthefidelitymodelthancomparablefirmsinother
countries?
Forthispurposewerelyonfourmaindatasources:

3
i. Oursurveyof600managersbelongingtoManageritalia(thetradeassociationformanagers
whoworkintheservicesector);
ii. Oursurveyof121topCEOs,selectedamongthelargestItalianfirmsandbanks;
iii. PayinformationonmanagersfromtheItalianSocialSecurityagency(INPS);
iv. Aninternationalmanagementpracticessurveycoveringover4,000manufacturingfirmsin
12countries.
Thedatasets(i)‐(iv)aredescribedindetailinSection3.Forthepurposeoftheanalysisthe
observationsinourdatasetshavebeenmatchedtotheItalianCompanyAccountsandAmadeus
databases,bothofwhichcontainstandardfirmbalancesheetandincomestatementinformation.
EventhoughtheprimarypurposeofthisresearchistoshedlightonthecharacteristicsofItalian
managersandcontributetothedebateontheItalianeconomy,ourstudyisalsoafirststeptoward
answeringsomequestionsofgeneralinterest.Ourmanagers’surveyisindeedthefirsttocombine
extensivepersonaldataonmanagerswithdetailedinformationonfirms.OurCEO’sstudyis,tothe
bestofourknowledge,thefirsttimeusestudyconductedamongtopmanagers.
Thepicturethatemergesfromourvariousdatasources,whilefarfromconclusive,isquite
consistent,andcanbesummarizedasfollows:
1. Italianfirmsarelesslikelytouseaperformance‐basedmanagementmodelthantheir
internationalcounterparts.WithinItaly,familyfirmsandfirmsthatoperateonlyonthe
nationalmarketaremorelikelytochoosefidelityoverperformance.
Accordingtoourinternationalcomparison,Italianfirmstrailtheircompetitorswhenitcomes
toformalsystemsofevaluationselectionandrewardofmanagerialtalent.Itisthenusefulto
usetheManageritaliadatatounderstandwhetherthisisageneralphenomenonoritis
concentratedincertainclassesoffirms.Thisshowsthat,withinItaly,familyfirmsand
domesticfirmsaremorelikelytohire,assess,reward,promoteanddismisstheiremployees
basedonpersonalrelationshipratherthanperformance(thisresultholdsifwecontrolfor
size,industryandlocation).Inparticular,familyfirms:
• Arelesslikelytohaveappraisalmeetingstoevaluatemanagers’performanceand
appraisalmeetingsarelessrelevantforthemanagers’careers;
• Aremorelikelytohiremanagersthroughfamilycontactsandlesslikelytouseformal
channelslikeheadhuntersandpublicadvertisements;
• Offerlessgenerousbonusschemes;
• Aremorelikelytodismissmanagersbecauseofdisagreementwiththeownersrather
thanbecauseofpoorperformanceorbadmarketconditions;
• Aremorelikelytopromotemanagerswhohaveagoodrelationshipwiththeowners
andarelesslikelytoofferfast‐trackpromotionsforstarperformers.

4
Conversely,theperformancemodelisfoundmoreofteninnon‐familyownedfirmsand
multinationals.ItisinterestingtonotethatItalianmultinationalstendtotreattheir
managersinthesamemannerasotherEuropeanmultinationals
Next,weexaminewhateffectmanagerialpolicieshaveontheselectionandbehaviourof
managers.
2. Managerialselectiondiffersinthetwomodels.Theperformancemodelattractsmanagers
thathavehigherlevelsofeducationandaremorerisk‐tolerant,butthereisnosystematicage
differencebetweenmanagersinthetwomodels.
Thefidelitymodelandtheperformancemodelusedifferentselectionmethods.
Performance‐basedfirmshireonthebasisofobservablesignalsofqualityratherthan
personalconnections,andhencetheyputapremiumofeducation,bothuniversitydegrees
andexecutivetraining.Aperformance‐basedincentiveschemeinvolvesacertainrisk,
becauseitrewardssuccessandpunishesfailure.Highlyrisk‐averseindividualsprefertowork
forfidelity‐basedfirms.Ourdatashowthatboththesepredictionsarecorrect.
Thefactthatthereisnosystematicagedifferencebetweenthetwomodelsindicatesthata
newgenerationoffidelity‐orientedmanagersisbeingtrained.Theywerehiredbecauseof
personalconnections,theyhavelowlevelsofeducation,andtheyknowthattheircareer
dependsonrelationshipsratherthanobservableoutcomes.Onlytimewilltellwhetherthis
generationisabletotacklethechallengesthattheItalianproductivesystemfaces.
3. Managersworkharder,arepaidmoreanddisplayhigherjobsatisfactioninperformance‐
basedfirmsthaninfidelity‐basedfirms.Managerswhoworklongerhoursalsodisplaya
differentleadershipstyle.
Weconstructtwomeasuresofmanagementpractices:anincentiveindex(bonus,appraisals,
merit‐basedpromotions,etc)andafidelityindex(roleofpersonalrelationshipinhiring,
firingandpromotions).Oursurveyshowsthattheeffortthatamanagerputs(hoursatwork
andweekendsatwork)issignificantlyhigherwhentheincentiveindexishighand
significantlylowerwhenthefidelityindexishigher.Theincentiveindexispositively
correlatedwithbothtotalcompensationandfixedsalary.Thisisexpected,giventhat
managersworkharderandtheytakeonmorerisk.
Thereisnothinginthetheorythattellsuswhethermanagersshouldbehappierina
performancemodelorinfidelitymodel.Whiletheformeroffersmorepay,thelatteroffers
moresecurity,requireslesseffort.However,themanagersinoursamplereporthigherlevels
ofjobsatisfactionwhentheyworkinperformance‐basedfirms.Thisconfirmsthewidelyheld
viewthatbeingamanagerinatightlycontrolledfamilyfirmtendstobealessrewarding
experience(unlessoneisafamilymember)
Finally,ourCEOtimeusesurveyshowsthatexecutiveswhospendmoretimeatwork,tend
todevoteasmallerpercentageoftheirtimetomeetingsandinparticularmeetingswith
consultants.Inaddition,theytendtodisplaymoreresponsivenesstounplannedevents.
4. Performance‐basedfirmsgrowfasterandhavehigherreturnoncapital.Bylinkingoursurvey
datawiththeItalianCompanyAccount(CentraledeiBilanci)database,wefindthatthe

5
incentiveindexispositivelycorrelatedwiththefirm’srecentemploymentgrowthrateas
wellasthereturnoncapitalemployedindex.
Thisreportisorganizedasfollows.Section2reviewstherelevantliteratureonmanagers’incentive
schemesandselectionpractices.Section3describesourdatasourcesindetail.Section4,5,and6
reportourfindings:Section4focusesonmanagers’characteristics;Section5describesfirms’
policies;andSection6analyzesthelinkbetweenmanagers’characteristics,firms’policies,and
observableoutcomes.Section7concludes.

2 LiteratureOverview
Thisresearchisrelatedtoseveralliteratures.AfirststrandcontainsstudiesonHRandmanagement
practices,whichlookatofheterogeneityofpracticesacrossfirmsandattheirrelationshipwithfirm
performance.Asecondrelevantstrandoftheliteraturefocusesonfamilyfirms.Finally,we
contributetotheliteratureonCEOselectionandimpactonfirmperformance.Webrieflyreview
eachoftheseliteraturesbelow.
2.1 LiteratureonManagementPractices,IncentivesandFamilyFirms
SeveralstudieshaveanalysedthefactorsbehindtheadoptionofspecificHRpracticesandincentive
(e.g.piecerate)contracts.GibbonsandWaldman(1999)surveythetheoreticalliteratureoncareers
inorganizations,focusingonhuman‐capitalacquisition,jobassignment,incentivecontracting,
efficiencywages,andtournaments.Theyapplythesemodelstoexplainissuessuchaswagegrowth
intheabsenceofpromotions,promotionsusedforjobassignment,promotionsusedtoprovide
incentives,andseparation.DemouginandSiow(1994)presentatheoreticalmodelthatlinksthe
probabilitythatanunskilledworkerissuccessfullytrainedorscreenedtofirms’effort.This,inturn,
dependsonthepresenceofpositivehiringcosts–whichtiltthefirm’spreferencetowardsinternal
training/screening–andoptimalfirmsize–whichmightconflictwithefficientmanagerial
husbandry.Themodelgeneratesanumberofpredictionsonlayoffs,lateralmobility,promotionsand
wages.
Ontheempiricalside,Baker,GibbsandHolmstrom(1994a)usedataonthepopulationofmanagers
fromasinglefirm,observedbetween1969and1988toprovideevidenceontheexistenceofinternal
labourmarkets,showingthatemployeeshavecareersinfirmsthatfollowmore‐or‐lessdefinedpaths
intheorganization.Theyshowthatthesecareerpathsarestablethroughtimeandresultinlong‐
termworker‐firmattachments,andthatwagesaretiedtothecharacteristicsofjobs,ratherthan
individuals.Thepaperalsodocumentstheexistenceofpromotion"fasttracks",whichrevealsthat
tenurewiththefirmdoesnotresultinbettercareerattainment,andthattheimportanceoflevelsto
payislargelydrivenbyselectionofindividualsthroughpromotion.Inacompanionpaper(Baker,
GibbsandHolmstrom,1994b)theauthorsfocusmorespecificallyonwages.Theirmainfindingisa
cohorteffect,i.e.cohortswhoearnmoremaintaintheiradvantageovertime,suggestingthatfirms
mayshieldtheiremployeesfromsomeofthemarketinducedvariationinmarginalproduct.
AsecondtypeofcontributionslooksatHRpoliciesusinglargedatasetswithemployeedetailsfor
numerousfirms.Abowdetal(2006),forexample,uselongitudinallylinkedemployer–employeedata

6
fromFrancetolookatthesimultaneousdeterminationofworkermobilityandwageratesusingan
econometricmodelthatallowsforbothindividualandfirm‐levelheterogeneity.Theresultsshow
remarkableheterogeneitywithbothpositiveandnegativedurationdependencepresentina
significantproportionoffirms.Theyshowaveragestructuralreturnstoseniorityareessentiallyzero,
butpositiveseniorityreturnsfoundinlowstarting‐wagefirms.Withasimilarapproach,Lazearand
Oyer(2004)useaveryrichSwedishdata‐setwithdetailedandaccuratejobclassifications,which
makeitpossibletodeterminewhetherjobopeningsarefilledinternallyorexternally,andtofollow
employeesastheychangejobs.Theyshowevidencethatfirmsfillalargenumberofjobsinternally,
especiallywithinhighermanagerialranks.Intermsofwages,externallabormarketsseemtobe
relativelymoreimportantthanidiosyncraticfirmeffects.
Prendergast(1999)providesanexcellentreviewonthesubjectofincentivecontracts,whichare
specifictypesofmanagement/HRpracticesusedtoexertemployees’effortandcorrecttime
allocation.Arecurringthemeinthiscontextisthetrade‐offbetweenriskandincentives,i.e.thatthe
provisionofincentivesisaidedbytheuseofpay‐per‐performance,buttheirprovisionimposes
additionalriskonworkers,whichiscostlytofirmsthroughhigherwages.Inthiscontext,payper
performanceshouldbelessfrequentwithnoisyperformancemeasures,orwhenagentsarelessable
tohandlerisk.Empiricalresearchhastestedtherelationshipbetweenpayforperformanceand
observedmeasuresofuncertaintyorriskaversion,withmixedresults.AckerbergandBotticini(2002)
testforrisksharinginsharecroppingbyconsideringhowfarmerwealth,aproxyforabilitytohandle
risk,affectscontractchoice.Theyfindthataftertheycontrolformatchingissues,morewealthis
correlatedwithagreaterlikelihoodofrenting,consistentwiththeusualrisk‐sharingstory.However,
observedmeasuresofuncertaintyhaverarelybeenfoundtobepositivelycorrelatedwithincentive
provision.Prendergast(2002)reviewstheavailableevidenceandsuggestthattheallocationof
responsibilitytoemployeesmayplayanimportantrolefortherelationshipbetweenuncertaintyand
incentives.Whenworkersoperateincertainsettings,firmsarecontenttoassigntaskstoworkers
andmonitortheirinputs.Bycontrast,whenthesituationismoreuncertain,theydelegate
responsibilitytoworkersbut,toconstraintheirdiscretion,basecompensationonobservedoutput.
Thismightinduceapositiverelationshipbetweenuncertaintyandperformancepay.
Asecondrelevantstrandofliteraturefocusesonmanagementpractices(bothintermsofHRand
operations),andtheirimplicationsforfirmperformance.Dataavailabilitydictatesthetypeof
methodologyused,withthefocusgraduallyshiftingfromsampleofasingleorfewfirms,tolarge
samplesoffirmsactivewithinasinglecountry,tolargesamplesoffirmsobservedinmultiple
countries.
Lazear(2000)relatestoeffectsofmonetaryincentivesonoutputusingdatafromasinglefirm.He
teststheexistenceofapositivecorrelationbetweenpieceratesandaverageworkerproductivity,
workforceability,andvarianceinoutputacrossindividuals.Theshifttowardsincentivepayis
associatedwitha44‐percentincreaseinoutputperworker,andasignificantriseinprofits.Bandiera
BarankayandRasul(2007)designafieldexperimenttoidentifythecausaleffectofhighpowered
managerialincentivesonfirmproductivity.Theyfindthatofferingmanagersperformancebonuses
insteadoffixedpayincreasesproductivityby22%,halfofwhichisduetothefactthat,whenpaid
performancebonuses,managersselectmoreproductiveworkers.
Ichinowskyetal.(1997)investigatetheproductivityeffectsofemploymentpracticesusingdatafrom
asampleof36homogenoussteelproductionlinesownedby17companies.Theyshowthatspecific
HRpractices–suchasincentivepay,teams,flexiblejobassignments,employmentsecurityand
trainingachievesubstantiallyhigherlevelsofproductivitythatfirmwithmore“traditional”HR
policies.

7
Amonglargesample,singlecountrystudies,BlackandLynch(2001)estimatetheeffectofworkplace
practices,informationtechnology,andhumancapitalinvestmentsonproductivityusingalarge
sampleofUSfirms.TheyestimateanaugmentedCobb‐Douglasproductionfunctionwithbothcross
sectionandpaneldatacoveringtheperiodof1987–1993,andfindthatitisnotwhetheranemployer
adoptsaparticularworkpracticebutratherhowthatworkpracticeisactuallyimplementedwithin
theestablishmentthatisassociatedwithhigherproductivity.Forexample,unionizedestablishments
thathaveadoptedhumanresourcepracticesthatpromotejointdecisionmakingcoupledwith
incentive‐basedcompensationhavehigherproductivitythanothersimilarnon‐unionplants,whereas
unionizedbusinessesthatmaintainmoretraditionallabormanagementrelationshavelower
productivity.Furthermore,theyshowthatplantproductivityishigherinbusinesseswithmore‐
educatedworkersorgreatercomputerusagebynon‐managerialemployees.
BloomandVanReenen(2007)collectsyntheticmeasuresofmanagementpracticesfor800medium
sizedmanufacturingfirmsinFrance,Germany,theUKandtheUS2.Theyreportevidenceof
significantheterogeneityinmanagementpracticesevenwithinnarrowlydefinedsectors.Thestudy
showstheexistenceofstrongpositivecorrelationsbetweenmanagementqualityandmeasuresof
firmperformance(totalfactorproductivity,salesgrowth,returnoncapitalandTobin’sq)and
betweenmanagementqualityandcompetition3.Bloom,SadunandVanReenen(2008)extendthe
previousanalysisaugmentingtheoriginalsamplewithasetof200Italianfirms.Theyshowthe
relativemanagerialweaknessofItalianfirmsvis‐à‐vistheUSand,toalesserextent,France,Germany
andtheUK.
Familyfirmsareacentralthemeofthisresearch.Fromatheoreticalperspective,Burkart,Panunzi
andShleifer(2003)provideamodeloffamilyownership,whichfocusesonthefounder’stradeoff
betweenmoreprofessionalmanagementandriskofexpropriation.Averyrelevantpointofthe
paperistheobservationthatthefounder’sdecisionisshapedbythelegalenvironment4,whichmay
rationalisethedifferentpatternsofcorporategovernancebetweenAnglo‐SaxonandContinental
Europeanfirms.
Arecentstrandoftheliteraturehasfocusedontheroleoffamilyownershipforfirms’growthand
performance.5BloomandVanReenen(2008)documentthatfamilyfirmswheretheCEOischosen
onaprimogeniturebasisshowsignificantlylowermanagementscoresthanotherfamilyandnon
familyownedfirms.Bloom,SadunandVanReenen(2008)discusstheroleoffirstgenerationfamily
firms,i.e.firmswherethefounderstillactsasCEOofthecompanyandotherfamilymembersplay

2SeeSection3fordetailsonthemethodology.
3Theyemploythreealternativemeasuresofcompetitivepressure:theinverseoftheLernerindex,theshareof
importsonindustryproductionandthenumberofcompetitorsreportedbythemanagersduringtheir
interviews.
4Specifically,inlegalregimesthatsuccessfullylimittheexpropriationofminorityshareholders,thewidelyheld
professionallymanagedcorporationemergesastheequilibriumoutcome.Inlegalregimeswithintermediate
protection,managementisdelegatedtoaprofessional,butthefamilystaysonaslargeshareholdersto
monitorthemanager.Inlegalregimeswiththeweakestprotection,thefounderdesignateshisheirtomanage
andownershipremainsinsidethefamily
5SeeBetrtandandSchoar(2006)forasurvey.

8
keymanagerialrolesandshowsthatthesespecifictypesoffamilyfirmsaccountforarelevant
fractionoftheItalianmanagerialgapvis‐à‐vistheUS.
VillalongaandAmit(2005),usingproxydataonallFortune500firmsduring1994‐2000findthat
familyownershipcreatesvalueonlywhenthefounderservesastheCEOofthefamilyfirmorasits
ChairmanwithahiredCEO,whilewhendescendantsserveasCEOs,firmvalueisdestroyed.
Consistentlywiththisfinding,Perez‐Gonzalez(2006)usesdatafromchiefexecutiveofficer(CEO)
successionstoexaminetheimpactofinheritedcontrolonfirms’performance,findingthatfirms
whereincomingCEOsarerelatedtothedepartingCEO,toafounder,ortoalargeshareholderby
eitherbloodormarriageunderperformintermsofoperatingprofitabilityandmarket‐to‐bookratios,
relativetofirmsthatpromoteunrelatedCEOs.ThesefindingsareconfirmedinBennedsenetal
(2006),wherevariationinCEOsuccessiondecisionsthatresultfromthegenderofadepartingCEO’s
firstbornchildisusedasaninstrumentalvariable(IV)fortheprobabilityofencounteringafamily
CEOs.Usingthisstrategy,theyshowthatfamilysuccessionshavealargenegativecausalimpacton
firmperformanceandthatthenegativeimpactoffamilyCEO’sisunderestimatedbystandardOLS
techniques.Inarecentcontribution,Bertrandetal(2008)studythefamilytreesandthebusiness
groupsof70ofthelargestbusinessfamiliesinThailand.Theyfindapositiverelationshipbetween
familysizeandinvolvementoffamilymembersinthebusinessgroup,especiallywhentheultimate
controlhaspassedfromthefoundertooneofhisdescendants,anddocumentthatgroupsthatare
runbylargerfamiliestendtohavelowerperformance. 
2.2 LiteratureonCEOs’Activity
EvidenceonCEOscharacteristicsandworkingenvironmentisremarkablythin.Tothebestofour
knowledge,ours,isthefirstsurveyonCEOs’useoftimeuse.6Oneofthefewstudiesthatfocuseson
CEOscharacteristicsisKaplanetal(2007)whouseadetaileddatasetwithassessmentsofCEO
candidatesforcompaniesinvolvedinprivateequity(PE)transactionstostudyhowCEOs’
characteristicsandabilitiesrelatetohiringdecisions,PEinvestmentdecisions,andsubsequent
performance.Theyhighlighttheimportanceof“soft”orteam‐relatedskillsforhiringdecisions,in
spiteofthefactthattheseskillsarenotnecessarilyassociatedwithgreatersuccess7.Frydman(2005)
investigatesthemarketformanagersfromthe1930stothe2000s.Thepaperdocumentsthatuntil
the1970s,themarketforCEOswascharacterizedbyrelativelystablepayandlowinequalityamong
executives,whilethesepatternshavereversedoverthepastthreedecades.Furthermore,using
biographicalsourcestoconstructaconsistentpaneldatasetfollowingtheeducation,careerpaths,
andcompensationoftopexecutivesfrom1936to2003,shedocumentstherapidincreasein
businesseducationandgreateroccupationalmobilitywithinthefirmsincethe1970s,andthatthe
fractionofexecutiveswhoworkedatonecorporationthroughouttheirentirecareerwasabout20
percentagepointshigherinthe1960sthaninthe1990s.
RelativelylittleisknownontheimpactofCEOsonfirmperformance.Westphal(1998)showsthat
CEOswithmoreindependentboardsspendtime“ingratiatingandpersuading”boardmembers,
whileAdamsetal(2005)documentthatfirmswhoseCEO’shavemorepowersdisplaymorevariable

6TheonlyotherstudyontheuseoftimebymanagersthatweareawareofisLuthans(1988).
7SeeGrahamandHarvey(2001)forasurveyof392CFOsaboutthecostofcapital,capitalbudgeting,and
capitalstructure.

9
performance.BertrandandSchoar(2003)constructamanager‐firmmatchedpaneldatasettotrack
topmanagersacrossdifferentfirmsovertimeandfindthatmanagerfixedeffectsmatterforawide
rangeofcorporatedecisions,includinginvestment,financial,andorganizationalpractices.
Furthermore,managerswithhigherperformancefixedeffectsreceivehighercompensationandare
morelikelytobefoundinbettergovernedfirms.Theyshowthatexecutivesfromearlierbirth
cohortsappearonaveragetobemoreconservative,whilemanagerswhoholdanMBAdegreeseem
tofollowonaveragemoreaggressivestrategies.
3 DataSources
Ouranalysisreliesonfourdatasets.Thefirsttwoarecollectedforthepurposeofthisstudy,
andcontaininformationonacrosssectionofItalianmanagersandCEOs.Wecomplement
thesewithtwofurtherpre‐existingdatasetstoshedlightontheevolutionofkeyvariables
overtimeandonthecomparisonbetweenItalianmanagersandtheirforeigncounterparts.
3.1 SurveyofManageritaliaMembers
TheaimofthisnovelsurveyistocollectinformationonthecharacteristicsofItalianmanagers,the
firmstheyworkforandobtainarichdescriptionoftheincentivesmanagersface,bothexplicitly(e.g.
performancebonuses)andimplicitly(e.g.importanceofpersonalrelationshipsforcareerprogress).
Inparticular,wecollectinformationon:
(1) Managers’demographics,education,familybackgroundandriskaversion
(2) Firms’ownershipstructureandmultinationalstatus
(3) Hiringandfiringpractices
(4) Careerprogressionpathwithinthefirm:appraisalsandpromotiontracks
(5) Thestructureofpayschemes
OursampleofmanagersisselectedfromthememberdirectoryofManageritalia,aprofessional
associationofmanagersoperatinginthetradeandservicessectors.Manageritaliamembersaccount
for96%ofallmanagersinthetradeandservicesectors.These,inturn,makeupfor20%ofallItalian
managers.8
Manageritaliamemberdirectorycontains22,100managersemployedby8,739firms.Ofthese,we
samplefromthe2,012firmsthatcanbematchedwiththeItalianCompanyAccountsDatabase–a

8Socialsecuritydataindicatethatin2006,thenumberofindividualsemployedona“managercontract”inthe
privatesectorwere117,000.Ofthese,23,000belongtothetradeandprivateservicesectors,and22,100
belongtoManageritalia.ManagersworkingforItalianbranchesofmultinationalfirmsbelongtothetradeand
servicesectorsevenifthefirmitselfisclassifiedasindustry—e.g.carmanufacturers—aslongasnoproduction
plantsarelocatedinItaly.

10
firmleveldatasetcontaininginformationonbalancesheets,firmdemographics,andemployment.
Theinformationisprovidedbycommercialbanksandcoversallthebanks’largestclients.9The
CompanyAccountDatabaseand,afortiori,oursamplinguniverseisskewedtowardslargefirms.
Toselectoursample,westartfromthe2,012firmsforwhichbalancesheetdataisavailable.We
furtherrestrictthelisttomanagersemployedinthethreemainoperationalareas–general
directorate,finance,andsales—andrandomlydrawonemanagerperfirmineitheroftheseareas.
Thefinalsamplecontains605eachofgeneraldirectors,financedirectorsandsalesdirectors,fora
totalof1,815observations.
TheadministrationofthesurveywasoutsourcedtoErminero&Co.‐ anestablishedsurveyfirm
locatedinMilan.All1815samplemanagerswerecontactedbyphonetoscheduleasubsequent
phoneinterview,administeredbyateamof35analyststrainedbyErminero&Co.Theresponserate
was33%,withanaveragedurationof21minutesperinterview.Thedatathuscontains603
observations,equallysplitacrossthethreeoperationalareas.
Theaveragesizeofthefirmsincludedinoursampleis240employees(50atthemedian).Intermsof
ownership,48%ofthefirminoursamplearefamilyorfounderowned,12%areprivatelyowned,8%
arestate‐owned.Wealsohaveasizeableproportionoffirmsownedbydispersedshareholders(i.e.
nopartydetainsmorethan25%ofthecompany’sshares)andprivateequitybackedfirms(8%).Most
ofthefirmsincludedinthesample(58%)areaffiliatedwithamultinational.In21%ofthecases,the
multinationalisheadquarteredinItaly.
TheManageritaliadatasetonlycoverstheservicesector.Amongservices,specificindustriesare
over‐represented,suchasWholesale(45%ofthesample)andBusinessServices(11%)andRetailand
SpecializedITservices(4%).Thesurveyisalsoskewedintermsoflocation.Mostofthesamplerefers
tofirmsincorporatedinLombardy(58%).However,thesurveyalsoincludesafairlyhighnumberof
firmsincorporatedinotherNorthernandCentralregionssuchasVeneto(8%),Piedmont(5%),Emilia
(9%),Tuscany(5%)andLazio(9%).
3.2 CEO’sTimeUseSurvey
TheaimofthissurveyistoshedlightontheactivitiesCEOsengageinonaday‐to‐daybasis.Tothis
purposewedesigneda“time‐use”questionnairethatallowstheCEOs’personalassistants(PA)to
recordinformationonthenatureofandtimeinvolvedinallactivitiesperformedoverthecourseofa
dayoverafivedayweek.
Thequestionnaireisdividedintothreeparts.ThefirstpartasksthePAtorecordtheinformationon
allactivitiesthatlast15minutesorlongerforeachdayoftheweek.Wecollectdetailedinformation
onthefollowing:
(1) ThetypeofactivitytheCEOisengagedin(e.g.meetings,phonecallsetc)
(2) Thedurationoftheactivity

9ThedataarecollectedbytheCentraledeiBilanci,anorganizationestablishedintheearly80sbytheBankof
ItalyandItalianBankswiththepurposeofrecordingandsharinginformationonborrowers.

11
(3) Whethertheactivityhadbeenscheduledinadvanceandifsowhen
(4) Whethertheactivityisheldregularlyandifsohowoften
(5) Wheretheactivitytookplace(e.g.ownfirmheadquarters,otherfirm)
(6) Thenumberofparticipants
(7) Thetypeofinsiderparticipants(e.gfinance,marketingetc.)
(8) Thetypeofoutsiderparticipants(e.g.suppliers,consultantsetc.)
ThesecondpartasksthePAtolistthetypeanddurationofallactivitiesthatlastlessthan15minutes
andallotheractivitiesnotlistedinthefirstpart.
ThethirdpartasksthePAtorecordwhetherscheduledactivitieshadtobecancelled,whetherthe
CEOstooksomedaysoffduringtheweekandbasicdemographicinformationontheCEO,namely
ageandgender.
CEOsinoursampleareselectedfromthelargestItalianfirmsandbanks.Sizeismeasuredasyearly
revenueforfirmsandastheaverageof(i)employment,(ii)Stockmarketcapitalization;(iii)Total
valueofloanportfolioforbanks.Themastersamplecontainsthetop850Italianfirmsfromthe
Dun&Bradstreetdatabaseandthetop50ItalianbanksfromthelistofallmajorItalianfinancial
groupscompiledyearlybytheResearchDivisionofMediobanca,aleadingItalianinvestmentbank.
TheadministrationofthissurveywasalsooutsourcedtoErminero&Co.All850institutionswere
contactedtoascertaintheidentityandcontactdetailsoftheCEO;thisprocedureyielded720
completerecords.Outofthese,50wererandomlyselectedforapilotsurveyandtheremaining670
formedthefinalsample.
SampleCEOsreceivedanofficialinvitationletterfromtheFondazioneRodolfoDebenedettithat
sponsorsthisproject,followedbyapersonalphonecallexplainingthepurposeofthesurveyandthe
relevantconfidentialityclauses.Uponacceptance,thesurveywasmailedtothePAidentifiedbythe
CEO,whowasaskedtorecordtheinformationandsendbackthecompletedformsviaeitherfaxor
mail.
Theacceptanceratewas18%;thefinalsamplecontainsinformationonthetimeuseof121CEOs,
belongingto110firmsand11financialinstitutions.
3.3 INPSDatabase
OurthirddatasetistheINPSdatabasewhichcontainsinformationontheentirepopulationof
workersregisteredwiththesocialsecuritysystem.TheItalianNationalInstituteforSocialSecurity
(IstitutoNazionaledellaPrevidenzaSociale,INPS)requiresfirmstofileayearlyreport(formO1M
until1998andformSNA‐770since1999)foreachworkeronthepayroll.Thedataareusedto
estimatetheamountofwithholdingtaxtheemployerhastopayonbehalfoftheemployees,andto
INPSascontributionstowardshealthinsuranceandpensionfunds.Thisdatabasecoverstheuniverse
ofemployeesintheprivatesector‐thusexcludingtheself‐employed,publicemployees,andoff‐the
bookswork.

12
Ourdatasetisasub‐sampleoftheuniverse,basedonworkersbornonanyoneoffourparticular
daysoftheyear.Ourdatareferto1985‐2004.Dataareextractedforeachoftheyearsbetween
1985‐2004.Ifaworkerisextractedinayear,informationisthenprovidedforalltheyearscovered
bythesampleprovidedtheworkerinpreviousorsubsequentyearcontributestoINPS.Hence,the
datasetisalongitudinalpanel,withdifferentcareerslengthswhichisparticularlysuitedtomake
comparisonsovertime.SinceonlyemployeesintheprivatesectorcontributetoINPS,aworkercan
leavethesamplebecauseheretires,orbecausehebecomesaself‐employedorjoinsthepublic
administration,ormovestoworkabroad.Moverswithintheprivatesectorcaninsteadbetracked.
Theformreportsinformationonannualearningsandonthenumberofweeksworkedanddays.
Earningsaredividedintotwocomponents:normalandoccasional.Occasionalearningsincludes
sumsdrawnfromthewagesupplementationfundlaid‐offorshort‐timeworkers,seniorityand
loyaltypremia,one‐timebonuses,relocationexpensesandbusinesstravelrefunds,themonetary
valueofgoodsinkind,andallowancesforlosttipsandcommissions.Thebulkoftheoccasional
earningsshouldbeonetime‐bonusesandtheirincidenceontotalpayhasbeenincreasingoverthe
years.Wewilldistinguishbetweenthetwocomplementandtheirsum,correspondingtototalpay.
Sincemisreportingisprosecuted,reportingerrorshouldbenegligible.
Giventhenatureofthedataset,eachobservationrepresentsasinglejob‐relationshipforwhichthe
employerhaspaidatleastonecontributiontoINPSonbehalfofitsemployeeduringthereference
year(whatiscalled‘contributiveposition’),andnotasingleindividual.Asaconsequence,forthe
sameworkermultipleobservationscanbefoundinthesameyearfordifferentpositionsopened
withthesameordifferentemployers.Toobtaintotalpaycomponentsforagivenindividual‐yearwe
aggregateacrossdifferentemployers.INPShasmadethedataavailableinananonymousformatto
guaranteeprivacy,butapartfromthat,dataarenotsubjecttotopcoding.Hence,informationis
availablealsoforworkersatthetoppercetilesofthepaydistribution,makingthedataparticularly
usefultoexplorepay‐structureissues.
Thedatasetalsohasinformationonjobcategories,albeitwitharoughbreakdown:apprentices,
productionworkers,clericalsandexecutives.Somedemographicinformationontheworkerisalso
available;inparticular,gender,yearandprovinceofbirth.Unfortunately,noinformationon
educationattainmentisavailable.
3.4 CEPManagementSurvey
Finally,inordertocontrastItalianmanagersandmanagerialpracticesinItalywiththoseprevailingin
othercountrieswehavereliedonafourthdatabase,theCEPManagementSurvey.Inthesummerof
2006theCentreforEconomicPerformanceattheLondonSchoolofEconomics,incooperationwitha
privateconsultancyfirm,employedateamof51MBA‐typestudentstocollectdataonmanagement
practicesonmorethan4,000firmsin12countries(seeBloom,SadunandVanReenen,2008,fora
fulldescription).FollowingthemethodologyinBloomandVanReenen(2007)thesurveywasbased
onagridof18questions,whichrelatetokeyaspectsofworkplacemanagement.

13
Fourofthesequestionsrelateto“people”managementandthesearethequestionswewillfocus
throughout.10Thequestionsareopenratherthantickboxandtheinterviewersaretrainedtoprobe
withfollowupquestionsinordertoascertainwhatisactuallygoingoninthefirm.Theyrelatetothe
promotionsystem,thefixing/firingofpoorperformers,therewardingofhighperformersandthe
incentivesandimportancegiventoattractingandretainingtalentedworkers.Eachquestionisscored
onascaleof1(“worstpractice”)to5(“bestpractice”)andthebasiccompositemeasurez‐scores
eachindividualquestion,averagesacrossthefourquestionsandthenz‐scoresthisaverage.For
example,onthepromotionquestionalowscoreindicatesthatemployeesarepromotedsolelyon
thebasisoftenure,whereasahighscorereflectsfirmswhopromoteonthebasisofeffortand
ability.
Insum,thescoresrevealwhetherthefirmdevotesmuchefforttopromoting,rewardingand
retainingitsmosttalentedworkers.
Toavoidthewellknownsamplebiasarisingfromthepsychologicalreflextogiveananswerthatthe
intervieweethinkstheinterviewerwantstohear,thesurveywas“doubleblind”.First,the
intervieweesdidnotknowthattheywerebeingscored.Second,theinterviewershadnoinformation
aboutthefirm’sperformancebeforetheinterview.Thiswasachievedbyselectingmediumsized
manufacturingfirmsandbyprovidingonlyfirmnamesandcontactdetailstotheinterviewers(butno
financialdetails).Thesesmallerfirms(themediansizewas270employees)wouldnotbeknownby
nameandarerarelyreportedinthebusinessmedia.
Thesurveyistargetedatplantmanagersinfirmsrandomlydrawnfromthepopulationofallpublic
andprivatefirmswithbetween100and5,000employeesinthemanufacturingsector.Theresponse
ratewas45%anduncorrelatedwithfirmperformance.Theinterviewstookonaverageof50minutes
withtheinterviewersrunninganaverageof78.5interviewseach,overamedianof3countries.11
Theoverallsampleconsistsofapproximately4,000firmsinEurope(France,Germany,Greece,Italy,
Poland,Portugal,SwedenandtheUK),Asia(China,IndiaandJapan)andtheUS.TheItaliansample
consistsof202firms,withanaverageemploymentof606employees.


10Theothermanagementpracticequestionsrelatedtoshop‐flooroperations(leanmanufacturingtechniques),
monitoring(trackingandreviewingofindividualandfactoryperformance)andtargets(thebreadth,realism
andinterconnectionofgoals).
11Detailedinformationontheinterviewprocesswasalsocollected,includingtheinterviewduration,date,time
ofday,dayoftheweek,andself‐assessedreliabilityscore,plusinformationontheinterviewees’tenureinthe
company,tenureinthepost,seniorityandgender.Robustnesstestsincludingtheseplusinterviewerfixed‐
effectsyieldresultsextremelysimilartotheonesreportedhere.


14
4 Managers’Characteristics
Thissectioncombinesinformationfromthefourdatasetstoshedlightonthecharacteristicsof
Italianmanagers.Wepresentevidenceonbasicdemographics,educationandsocialbackgroundand
anovelmeasureofattitudestowardsrisk.
4.1 Demographics
4.1.1 Age
TheaverageageofItalianmanagersappearstobeinlinewiththeaverageageoftheircolleaguesin
othercountries(seeFigure1:Age,InternationalComparison).TheaverageItalianmanageris45
yearsold,whichisrathersimilartoaveragemanageremployedintheUKandtheUS.Italian
managersareyoungerthantheirJapanesecounterparts(50yearsoldonaverage).
TheManageritaliadatasetallowsustodisaggregateagebytypeofmanagerandtypeoffirm.
AverageageintheManageritaliasampleis47years(Table1).Unsurprisingly,individualswithmore
seniorrolestendtobeolder(49)(Figure2).Peopleinfinanceareslightlyyoungerthanpeoplein
salesandgeneralmanagement(46vs.47yearsold).Multinationalstendtohaveslightlyyounger
managers,butthedifferencesarenotstatisticallysignificant.Thesurveyalsoshowsthatmanagers
aresignificantlyyoungerifthefirmisownedbyafamily,andthemanagerisamemberofthefamily.
Theaverageageofthisspecifictypeoffamilymanagersis39,vs.47formanagersworkinginafamily
firm,whicharenotmembersofthefamily.12
TheCEOquestionnaireshedssomelightontheagedistributionofthemanagersatthetopofthe
largestItalianfirms.Figure3,showsthatCEOsinthesampleexhibitconsiderablevariationinage.
Theaverageageis54,whiletheyoungest5%ofCEOsisyoungerthan41andtheoldest5%isolder
than67.
TheextentofvariationintheagedistributionisconsistentwithpreviousfindingsinPratandSadun
(2006)whocomparetheageprofileoftheCEO’softhetop40Italianfirmsandthetop40USfirms.
Intheirsampletheaverageageis58inItalyand56intheUS.However,thestrikingdifferenceisin
thedispersion:Italiantopcompaniesaremuchmorelikelytoheadedbymanagersthatarequite
youngorquiteold.WhileintheUSmostCEO’sarebetween50and60,inItalytherearetwenty
CEO’sover60and13intheirforties.13
TheINPSdata(seeFigure4)displaysaslightupwardtrendintheageofItalianmanagersoverthe
last20years:themedianagegoesfrom45in1985to47in2004.Instead,agedispersiongoesdown:
therearefeweryoungmanagersbutthesameshareofoldmanagers.

12Thedifferencebetweenfamilymanagersandtheothersisstatisticallysignificantatthe5%level.
13LippiandSchivardi(2007)arguethattherelativelylargefractionofabove‐retirementagemanagersinItaly
reflectstheimportanceinItalyofrelationsandnetworkinbusinessandthefactthatthestockofrelationis
increasingwithage.Hence,firmsmaybewillingtotradeoffefficiencyagainstaccesstonetworkswheninthe
theirmanagerialturnoverdecisions.Theyalsodocumentanegativerelationbetweenmanagerageabovea
certainthresholdandafirmTFP.

15
4.1.2 Gender
Asinallcountrieswehavedatafor,mostmanagersaremen.
IntheCEPinternationalcomparison,Italyappearstobeoneoftheworstperformersintermsof
genderequality(Figure5).Forexample,only1%ofthemanagersinterviewedinItalywerefemale.
ThisisveryclosetothefractionoffemalemanagersinFranceandJapan,butsignificantlylowerthan
theUKandtheUS(5%).
However,theproportionoffemalemanagersismuchhigherintheINPSdata(tobediscussedbelow)
andintheManageritaliasample(10%,Table1),perhapsreflectingthedifferentfemaleparticipation
inservicevs.manufacturingindustries.Interestingly,theManageritaliadataset(Figure6)showsthat
thegendergapismuchsmallerinfinancethaninsalesorgeneralmanagement:thefractionof
femalemanagersis20%infinance,vs.6%insalesandgeneraladministration.Thisobservationis
somewhatsurprisingasfinanceis,atleastinAnglo‐Saxoncountries,oftenperceivedtobeamale‐
orienteddiscipline,incomparisonwithmarketingandstrategy.14
Inoursampleof121topCEOs,onlytwoarewomen.Suchastronggenderimbalanceatthetopis
foundinmostcountries:forinstance,onlytwooftheUStop‐100FortuneCEOsarewomen.15
Finally,accordingtoINPSdata,theimportanceofwomeninItalianmanagementhasimproved
markedlyinthelasttwentyyears.AsFigure7shows,theratioofwomenmanagerswentfrom6/7%
inthelateEightiestoover12%in2004.Dowomenfaceaglassceiling?Namely,arethey“allowed”
intomanagerialpositionsbutonlyaslongastheyarelowrankingones?Ifwerestrictattentionto
thetopquartileofmangers(definedbytotalpay),wefindthatwomenarelessrepresentedthanin
theprofessionatlarge.However,theshareofwomeninthetopquartilehasgrowntremendouslyin
relativeterms,goingfrom1%in1985to8%in2004.
4.1.3 NationalOrigin
WeknowtheplaceofbirthoftheManageritaliamembers.About4%ofthemwerebornoutsideItaly
(Table5).Multinationalsaremorelikelytoemployforeign‐bornmanagers,althoughthedifferenceis
notlarge.Thefractionofforeignmanagersis2%indomesticfirms,andrespectively4%and6%in
Italianandforeignmultinationals.Non‐Italianstendtoconcentrateinseniorpositionsandinthe
financearea.Forexample,6%ofmanagersinthefinanceareaareforeignvs.the3%insalesand
marketing.
Regardingregionalorigin,theINPSdatashowthatindividualsaremorelikelytobecomemanagersif
theyareborninregionsthathaveahighdensityoffirms.Forinstance,20%ofthemanagersinthe

14SeeforinstanceWallStreetJournal(2005).Thisarticle,entitled“MenDoNumbers,WomenDoStrategy,”
builtfrominterviewswithrecruitersandsomestatisticsconcludesthatfemaleMBAstudentsarelesslikelyto
takefinancecoursesandtoapplytojobsinfinance.TheotherregularitythatappearsfromtheManageritalia
dataisthatfamilyfirmsarelesslikelytohavefemalemanagers.Ontheotherhand,ifthemanagerisafamily
member,theyaremorelikelytobefemale.Thisseemstoindicatethatfamily‐runfirmsarelesslikelytohire
womenunlesstheyarepartofthefamily.WewillcomebacktotheissueoffamilytiesinSection4.2.
15SeeGambaandGoldstein(2008)foranin‐depthstudyofgenderimbalanceinItalianboardsofdirectors.The
shareoffemaledirectorsismuchlowerinItalythanintheUSandinNorthernEuropeancountries.

16
INPSrecordsareborninLombardiawhere38%ofthefirmsareregistered.Thissuggestsastrong
locallearningcomponentinacquiringmanagerialabilities.
4.2 Managers’Background
4.2.1 Education
OneofthemoststrikingfeaturesofItalianmanagersistheirrelativelylowlevelofformaleducation:
justover50%ofthemanagersworkinginfirmswhichwereinterviewedintheCEPsurveyhadan
undergraduatedegree(Figure8,upperpanel).AmonglargeEuropeancountries,onlytheUKhasa
similarproportionofcollegegraduatesinmanagement(44%),whileallothercountriesare
characterisedbyamuchhigherproportionofcollegegraduates.Forexample,FrenchandUSfirms
reportonaverage60%ofcollegegraduatesinmanagement.
ThisisonlyinpartareflectionofthefactthatItalianworkersareonaveragelesseducatedthan
workersinothercountries.Forinstance,theaveragedegreeofworkerswhoarenotinmanagerial
positionsis14%inItaly(Figure8,lowerpanel).ThefigureislowerinGermany(12%)andFrance
(13%)andalmostthesameintheUS(15%).
TheshareofManageritaliamemberswithanundergraduatedegreeisalmostexactly50%.The
percentagegoesdownforpeopleworkinginsalesandmarketing(Figure9).Thereappearstobe
importantsectoralandregionaldifferences.Theshareofmanagerswithanundergraduatedegreeis
aslowas20%inthetravelindustryandgoesupto65%inbusinessservices.Theshareislowestin
Northernregions,especiallyVenetoandPiedmont.
Whetheramanagerholdsacollegedegreeiscorrelatedwithawellspecifiedsocioeconomic
background.Forexample,theoccupationofthemanager’sfatherseemstobeagoodpredictorfor
thepresenceofacollegedegree.Only30%ofthe117managerswhoreportedthattheirfatherwas
abluecollarworkerholdadegree,vs.the65%ofmanagerswhoreportedthattheirfatherwasa
manager,entrepreneuroranotherprofessionalfigure.Similarly,thefractionofmanagerswitha
collegedegreeis77%ofthosewhoreportedthattheirfatherheldacollegedegree,vs.the44%of
thosewhoreportedthattheirfathersinterruptedtheircurriculumbeforeuniversity.Thedataalso
showthatthepresenceofacollegedegreeismorelikelyamongforeignandyoungermanagers16,as
wellasforfamilymanagers(i.e.managersworkingforafamilyfirmandbelongingtotheowning
family).
Besidesonlyafractionofthemanagersholdingacollegedegree,amongthosewithone,thegrade
theyobtainedisjustcomparabletothemeangradeofthoseholdingauniversitydegree.Managers
averagegradeis101.8(themaximumgradebeing110withhonours),slightlybelowthemeangrade
amongthegraduatesinarepresentativesurvey17.Hence,insofarascollegedegreegradesare
correlatedwithability,managersdonotseemtobeselectedamongthemostablecollegegraduates.

16Forexample,76%offoreignmanagershaveacollegedegree(vs.49%ofItalianmanagers)andthe
percentageofmanagerswithacollegedegreeis73%formanagersbelow40years,53%formanagersbetween
40and50years,and30%formanagersabove50years.
17Inthe2004SurveyofHouseholdIncomeandWealth,arepresentativehouseholdsurvey,theaveragegrade
amongcollegegraduatesis102andthemedianis104.

17
Itisinstructivetocomparemanagers’demographictraitsandeducationlevelswiththoseofother
closecategoriessuchasexecutives(clericalemployeeswithadministrativetasks),professionalsand
selfemployedandentrepreneurs.ForthiswehavereliedondatafromtheSurveyofHouseholds
IncomeandWealth(SHIW)–abiannualsurveyrunbytheBankofItalyonalargesampleofItalian
families.Toobtainareasonablenumberofobservationsonthesecategorieswehavepooled
observationsfromthelastthreewaves(years2000,2002and2004).Comparisonsareshownin
Table2.18Managersareabout5yearsolderthanotherexecutivesandprofessionals,moreeducated
thanthesetwocategories(theshareofmanagerswithadegreeis15percentagepointslargerthan
amongexecutivesandprofessionals)buttheyaremoremaleoriented.Ontheotherhand,
comparedtoentrepreneurs,managersareabitolderandhaveasmallershareofwomen(10%
versus20%)butaremuchmoreeducated:amongentrepreneursthesharewithacollegedegreeis
only8%.
4.2.2 Family
FamilyfirmsareakeyfeatureoftheItalianeconomy.LaPortaetal(1999),forexample,reportthat
60%ofItalianmedium‐sizedpubliclytradedfirmsbelongtoafamily(includingbothfoundersand
secondgenerationsfirms),vs.10%intheUSand40and50%inFranceandGermany,respectively.
TheimportanceoffamilyfirmsintheItalianeconomyisconfirmedintheCEPsurvey.Table3shows
thatthefractionoffamilyownedfirmsinItalyrecordedintheCEPsurveyis62%,significantlyhigher
thanGermany,France,theUKandtheUS,whichrangefrom38%to28%.Firstgeneration(i.e.,firm
wheretheCEOhasstillanactiverole)andsecondgenerationfamilyfirmsarebothover‐represented
inItalycomparedtoothercountries,althoughtheproportionoffounderownedfirmsisslightly
higher(37%vs.25%).
ThefractionoffamilyfirmsisalsoveryhighintheManageritaliasurvey(47%)19,aswecanseefrom
Table5.Asonewouldexpect,themanagerismorelikelytobeafamilymemberiftheCEOispartof
thefamilythatownsthecompanyandthefirmisnotamultinational.Seniormanagersarealsomore
likelytobefamilymembers.Interestingly,theprobabilitythatthemanagerispartofthefamilygoes
downdrasticallyifthefirmisaMultinational–lesssoiftheMultinationalisheadquarteredinItaly.
4.2.3 AttitudetowardsRisk
Managerstendtobeinvolvedinlarger,morecomplexandrisk‐intensivedecisionsthanother
workers.Theyalsotendtooperatewithinacomplexwebofformalandinformalprofessional
interactions.Theirattitudetorisktakingandtointerpersonaltrustmaybeusefulingaugingtheir
managementstyle.
Inordertoidentifytheirattitudestowardrisk,weaskedthemanagerstwodistinctquestions.Inthe
firstquestion,weaskedthemanagerstostateexplicitlytheirpreferencetowardsrisk,choosing
betweenfourpossiblecombinationsofriskandprofits(fromlowrisk,lowprofit,tohighrisk,high
profit).Thesecondquestiondiffersbecausethemanagerswereaskedtostatetheirpreference
between10differentpairsinvolvingasafeprospectandariskyonewithdifferingcombinationsof
riskandreturn,buttheywerenottoldexplicitlywhichcombinationwasriskier.Intheanalysiswe

18MeancharacteristicsofmanagersinSHIWareverysimilartothoseintheManagerItaliadataset;meanageis
47years,theshareofmalemanagersis89.9%and42.6%holdadegree.
19Ofthese,19%arefounderownedand28%aresecondgenerationfamilyfirms.

18
useaprincipalfactorcomponentofthetwovariables,anddefineas“risk”theresultingstandardized
variable.
Withrespecttorisk,therearethreeclearpatterns.Themostrisk‐tolerantmanagersarein
multinationalfirms,infirmsownedbyprivateequitygroupsandtendtobeemployedinthesales
area(Figure10).Insection0wewillcomebacktothepatternofrisktoleranceanditsrelationto
firm/jobcharacteristicsandwewillshowthatitcanbeinterpretedasanequilibriumselection
phenomenon:morerisk‐tolerantmanagersarematchedtojobsthatinvolvesteeperincentive
schemes.Instead,theonlypatternthatemergeswithrespecttotrustisthatmanagersspecializingin
financearelesstrustingthanthoseingeneralmanagementandsales.
5 Firms’ManagerialPolicies
ThenextstepinouranalysisshedslightontheincentivestructurefacedbyItalianmanagers.We
presentevidenceonseveraldimensionsofincentives,rangingfromexplicitshorttermincentives
relatedtoobjectivemeasuresofperformance(i.e.bonuspay)toimplicitlongtermincentivessuchas
theroleofpersonalrelationshipsonthemanagers’careerprospects.
Ineachsection,wefocusonthedifferencesacrossdifferenttypesofownershipstructures(e.g.
familyvs.disperseshareholders),andbetweenfirmswithinternationalexposurevs.purelydomestic
companies.Forthesakeofsimplicity,wefocusourdiscussiononthedifferencesemergingfromthe
rawdata(i.e.unconditionalcorrelations).Mostoftheresultsthatwediscussstillholdifoneaddsa
batteryofcontrols.Table11andTable12exploretherobustnessofourresultstotheinclusionof
additionalcontrolsforfirm(e.g.sizeandindustry)andmanagercharacteristics(e.g.areaofwork,
seniority).

5.1 InternationalComparison
TheCEPmanagementsurveyallowsadirectcomparisonofthetypeofmanagementpractices
adoptedbymediumsizedItalianmanufacturingfirms.Whenwelookatoverallscoresofthevarious
indicatorsofmanagerialpractises,thedirectcomparisonwiththeirinternationalpeersshowsthat
ItalianfirmsaresimilartoUK,andFrenchfirms,butsignificantlyworsethanJapanese,German,and
USfirms(Figure11,A).
However,theoverallmanagementscoreshideaninterestingheterogeneitybetweenpractices
gearedtowardoperationalexcellence,andthoserelativetopeoplemanagement,i.e.theselection,
reward,hiringandpromotionoftheworkforce.
AllcountriesexcepttheUSscorehigheronoperationalratherthanpeoplemanagement(Figure11,
B)andthedifferenceishighestforFranceandItaly.Analyzingthedifferentcomponentsofthe
peoplemanagementvariableseparately,revealsthatItalyrankslowestorsecondlowestonseveral

19
personnelpolicies,rangingfromhiringpractices,totheuseofappraisalsandbonuses,andtotalent
management(Figure11,C).20
5.2 AnalysingPeopleManagementwiththeManageritaliaSurvey
5.2.1 Recruitment
Wedefinethreeclassesofhiringchannelsbasedontheexperienceofthemanagersinoursample:
themostimpersonalone(headhunters,agencies,ads,ortakenawayfromcompetitors)accountsfor
about20%ofthesample;alessimpersonalonebutstillbasedonprofessionalcontacts(business
contacts,self‐referrals,recommendations)accountsforover50%ofthecases;finally,sample
managersgottheirjobthroughfamilyandfriendscontactsin26%ofcases.
Figure12andTable11showthatfirmownership,nationalityandinternationalexposurecorrespond
tohiringpractices.
Inparticular,theunconditionalcorrelationsinFigure12suggestthat:
1. Comparedtootherownershipstructures,firmswithinsiderownership(founder,familyor
otherprivateindividuals)aremorelikelytohirethroughinformalnetworksandlesslikelyto
hirethroughmarketchannels
2. Comparedtoforeignmultinationals,Italianfirms(bothdomesticandmultinational)aremore
likelytohirethroughinformalnetworksandlesslikelytohirethroughmarketchannel.
Recruitmentpracticesthusappeartodependonthecompany’snationalorigin,withItalianfirms
morelikelytousepersonalorevenprofessionalchannels.Ourdatacannotsaywhetherthisisdueto
differentcorporateculturesortotherelativelackofcontactsofnon‐Italianfirms.
5.2.2 Appraisals
Akeyelementofhumanresourcesmanagementisasystemtoevaluatetheperformanceandthe
professionalgrowthofemployees.Thisappliesafortioritomanagers.Weaskedmanagersinour
Manageritaliasample:(i)Whetherthereareregularappraisalmeetingstoevaluatetheir
performance;(ii)Howoftenthemeetingsareheld;and(iii)Howimportantthosemeetingsareto
determinepromotions,bonuses,salaryandfiringdecision.Theanswerstothethreequestionsare
reportedgraphicallyinFigure13andanalysedinmoredetailinTable11.
Afirstand–inourview–stunningresult,isthatalmosthalfofthemanagersinoursamplenever
faceappraisalmeetings.Thisisparticularlystrikinginlightofthefactthat,asourtimeusesurvey
(section6.1)shows,topexecutivesspendalargeamountoftimeinmeetings.Giventhepresenceof
ameeting‐orientedculture,itissurprisingthathalfofthefirmsdecidetodevotenomeetingtimeat
alltoevaluatingthepathoftheirmanagers’talent.

20ItisworthnotingtheItaliangapinpeoplemanagementpersistsevenoncewecontrolforfirms’sizeand
sectorofactivity.

20
Patternsofassessmentvarytremendouslybyclassoffirms,andthesepatternsaresimilaracrossthe
threequestions.Figure13showsthat:
1. Thelikelihood,frequencyandimportanceofappraisalsislowerinfamilyfirms.Incontrastto
theearlierfindingsregardinghiringchannels,firmsownedbythefounderorotherprivate
individualsdifferfromfamilyfirms.
2. Comparedtodomesticfirms,multinationalfirmsputmoreemphasisonallthreeaspectsof
appraisals.
3. Amongmultinationals,USfirmsputthestrongestemphasisonallthreeaspectsofappraisals.
Table11furthershowsthatthelikelihood,frequencyandimportanceofappraisalsincreasewith
managers’seniority.Thisisasomewhatsurprisingresult,asonewouldexpectjuniormanagerstobe
moremonitored(byseniormanagers).Oneinterestingresultisthattheemphasisonappraisalsdoes
notdependonthefunctionalareathemanagerbelongsto.Firmsizedoesnotseemtomattereither,
oncesectorcontrolsareincluded.
5.2.3 Bonuses
Weaskmanagerswhethertheircompensationpackageincludesabonusandhowlargethatbonus
is.Table6showsthat73%ofourmanagersreceiveabonusandtheaveragebonus(includingthose
whogetzero)amountsto15%oftotalcompensation.
Figure14showsthatfirmownership,nationalityandinternationalexposurematterbothforthe
existenceandthesizeofbonuspayments.Thefigurehighlightsthat:
1. Comparedtootherownershipstructures,firmswithinsiderownership(founder,familyor
otherprivateindividuals)arelesslikelytoofferperformancebonusesandtheseaccountfor
asmallershareoftotalcompensation.
2. Comparedtomultinationalfirms–especiallyifforeign‐‐domesticfirmsarelesslikelytooffer
performancebonusesandtheseaccountforasmallershareoftotalcompensation.
TheregressionanalysisinTable11allowsustocomparetherelativeimportanceofownershipvs.
multinationalstatus.Theevidenceindicatesthatthelatterdominates.Namely,thereisnosignificant
differencebetweeninsiderandoutsiderownershiponcemultinationalstatusiscontrolledfor.
Table11alsoshowsthatbonusesaremoreimportantinlargerfirmsandforyoungermanagers.
Finally,managersemployedinsalesareofferedmorepowerfulincentiveschemes.Thisresultshould
beinterpretedtogetherwiththefindings–intheprevioussection–thattheemphasison
assessmentisthesameacrossthethreefunctionalareas.Onepossibleexplanationisthat,
comparedtofinanceandgeneralmanagement,salesperformanceiseasiertomeasure.
5.2.4 PromotionsandDismissals
Oursurveycontainsanumberofquestionsaboutthecriteriaforpromotionsandthecriteriafor
dismissals.
Letuslookfirstatpromotions(Table6andFigure15).Reassuringly,95%ofmanagersinoursample
reportthatperformanceisanimportantfactorinmanagerialpromotions.Thishighlevelofpositive

21
responsesmeansthatthisquestionhaslimitedabilitytodiscriminateamongfirms(exceptincertain
casesofinsideownership).Otherimportantfactorsaretenure,namelynumberofyearsinthefirm
(36%ofmanagers)andqualityoftherelationshipwiththeowners(85%).Asignalofastrongimplicit
incentivestructureisthepresenceofapromotionfast‐trackforpromisingyoungmanagers,which
canbeseenastheoppositeofpromotionbytenure.Fasttracksystemsarepresentin37%ofour
firms.
Figure15highlightssystematicdifferencesbetweenclassesoffirms.Inparticular:
1. Multinationalsarelesslikelytopromoteonthebasisoftenure,whilenoclearpattern
emergesintermsofownershiptypes.
2. Multinationalsaremorelikelytoofferfasttrackpromotionstostarperformers.
3. Asonewouldexpect,promotionsdependontherelationshipwiththeownerswhenthe
ownersareinsiders,withnosignificantdifferencebetweenfamily,founderandprivately
ownedfirms.
DismissalsareanalyzedinTable6andinFigure16.Amanagermayleavethefirmvoluntarily(better
joborpersonalreasons)orinvoluntarily(poormarketconditions,problemswiththeowners,and
poorperformance).21Itisinterestingthatthemostcommoncauseofinvoluntaryseparationis
neitherthestateofthemarket(13%)northeperformanceofthemanager(26%)buttherelationship
withtheowners.
Figure16showsthatthereisastarkdifferenceamongfirmclasses.Thestateofthemarketand
managerialperformancearesignificantlymoreimportantinmultinationalfirms,especiallyif
American(managersemployedbyUSmultinationalsare28percentagepointsmorelikelytobe
dismissedbecauseofpoorperformancethanmanagersinothermultinationals).
Managersinmultinationalfirmsarealsomuchmorelikelytoleavetheirfirmbecausetheyfinda
betterjob.Atthisstage,thisfindingmightadmitbothanegativeinterpretation(theyaremorelikely
toleavebecausetheyarelesshappy)andapositiveone(theyfacemoreopportunities,either
becausetheyhavemoretalenttostartwithorbecausetheyhavemorechancesofgrowing).Aswe
shallseeinsection6.4,theevidenceonjobsatisfactionmilitatesagainstthenegativeinterpretation.
Figure16alsorevealsthatfirmownershipiscorrelatedwithreasonsfordismissal.Inparticularwe
seethatmanagersarelesslikelytoleavethefirmbecauseofpoorperformanceandmorelikelyto
leavethefirmbecauseofpoorrelationshipswiththeownerswhenthefirmisownedbyafamilyor
itsfounder.
TheregressionanalysisinTable12againallowsustoassesstherelativeimportanceofownershipvs.
multinationalstatus.Theevidenceindicatesthatthelatterdominates.Namely,thereisnosignificant
differencebetweeninsiderandoutsiderownershiponcemultinationalstatusiscontrolledfor.

21Obviously,weexpectthemajorityofourinvoluntaryseparationstotaketheformofaresignationrather
thananactualdismissal,whichinItalyonlyoccursinextremeconditions.

22
5.3 TheEvolutionoftheIncentiveStructure:EvidencefromINPS
AccordingtotheINPSDatabase,thepay(inrealterms)ofItalianmanagershasincreasedinthelast
20yearsbyabout70%whilethepayofmanagersatthebottomdecilehasmorethandoubled
(Figure18).Compensationdoesnotseemtobesignificantlydifferentacrossfirmsizeclasses(Figure
17)
Thestructureofmanagerialcompensationhaschangeddramatically.In1985,almostnoItalian
managerreceivedavariablepaycomponent(Figure19).IntheendoftheEightiestheshareof
managerswithbonusincreasedquicklyover80%.Thebonushasalsobecomeamoreimportantpart
oftotalpay,around15%forthemedianmanager;furthermorefora10%ofthesamplebonusshares
accountsformorethanonethirdoftotalpay.
Togainadditionalinsightintothedynamicsofincentives,wefocusontwocohortsofmanagers:
thosewhowere35‐44yearsoldin1985andthosewhowere35‐44yearsoldin1995.Wefollow
themfortenyears.
Oneimportantpointtobearinmindisthatweonlyknowwhetheranindividualpaidcontributions
toINPS.Whenamanagerleavesoursample,therecantwopossibilities:(1)Heisnolongerworking
(inwhichcase,hemaydrawapension);(2)HeisstillworkingbuthedoesnotappearintheINPS
database(eitherbecauseheisself‐employed,hasajobinthegovernmentsectororbecausehe
worksabroad).Theinterpretationofthefindingsinthissectiondependsinpartonwhatonethink
thatamanagerdoeswhenhedropsoutoftheINPSsample.Whilesomeoftheindividualswholeave
managementdobecomesuccessfulentrepreneurs,wehypothesizethatthisaccountsforasmall
fraction.Theothers–thosewhoretire(wearefocusingonrelativelyyoungmanagers)orthosewho
downsizetofreelancing–arelikelytosufferamonetaryloss.
Figure20depictsthefractionofmanagersinagivencohortwhoarestillemployed(asmanagersor
asotherkindsofnon‐independentworkers)afternyears.Thehazardrateishigh:afterfiveyears,
30%to40%ofourmanagershavedisappearedfromthesample.Thesurvivalratewassystematically
higherforthe1985managersthanforthe1995managers.
Wealsocomputethepaydynamicsforthetwocohortsunderconsideration(Figure21and22).The
firsttwographsareobtainedunderthe(optimistichypothesis)thatmanagerswhodropoutofthe
samplefacethesamesalarydistributionasthosewhostayinthesample:thismeansthatwecanjust
dropthemissingobservations.Thelasttwographsinsteadcorrespondtothemostpessimistic
scenarios:managerswholeavetheINPSsamplereceiveazerosalary.Wenormalizethetotalpayof
amanagerinthebaseyear(either1985or1995)andwestudyitsevolutioninthenexttenyears.
Thefirstpointtonoteisthat,inbothcohorts,managersfacestrongintertemporalincentives.Inthe
optimisticscenarioatop‐quarterperformer(manageratthe25thpercentileoftotalpay)earns,after
tenyears,over50%morethanabottom‐quarterperformer.Inthepessimisticscenario,abottom‐
performerendsupveryquickly(aftertwoyears)withazerosalary.
Ineithercase,thiskindofdynamicvariationappearstobelargerthanyear‐by‐yearvariationin
bonuses.Forinstance,in1995top‐quarterperformersreceiveda17%bonuswhilebottom
performerreceivedan8%bonus.Comparethis7‐pointdifferencetothe50%difference(minimum)
duetodynamiceffects.

23
Thereisanotabledifferenceinthepaydynamicsforthetwocohorts.Inboththeoptimisticandthe
pessimisticscenariothesamepatternemerges:the1985cohorthadamorefavourableincome
profilethanthe1995cohort,possiblyreflectingdifferentoverallgrowthratesoftheeconomyover
thetwodecades.Intheperiodunderconsideration,amedianperformerinthe1985cohortcould
expecta60%pay(inthegoodscenario)anda10%payincreaseinthebadscenario).Amedian
performerinthe1995cohortfaceda40%increaseinthegoodscenarioandwouldfindhimself
withoutajobinthebadscenario.
6 Fidelityvs.Performance:Managers’Selection,Effortand
Outcomes.
Theanalysisofpersonnelpoliciesamongoursamplefirmsrevealstwodistinctmodels.Somefirms
adoptaperformancemodel,wherebymanagersarehiredthroughformalchannels,theyare
assessedregularlyandrewarded,promotedanddismissedonthebasisofobjectivemeasuresof
performance.Otherfirmsinsteadadoptafidelitymodelofmanagerialtalentdevelopment:theyhire
managersonthebasisofpersonalorfamilycontacts,theydonotassesstheirperformanceformally,
andtheyrewardthembasedonthequalityoftheirrelationshipwiththefirm’sowners.
Theanalysisalsorevealsthatnon‐familyfirmsandmultinationalsaremorelikelytoadoptthe
performancemodel,whereasfamilyfirmsandfirmsthatoperateexclusivelyinthedomesticmarket
tendtoadoptthefidelitymodel.
Inthissectionweassesswhetherandhowthetypeofmanagerialmodelaffecttheselectionof
managersintothefirm,theireffortandbehaviour,theirincomeandjobsatisfactionandultimately
thefirm’sperformance.
Wehaveshownthatpersonnelpoliciesvaryacrossfirmsonfourkeydimensions,namely,hiring
practices,appraisalsandpromotions,bonusesanddismissals.Withinthese,wecandistinguish
betweenincentivesthatareexplicitlybasedonmanagers’performancesuchasbonusesandfast
trackpromotionsandthosethatarebasedontherelationshipbetweenthemanagersandthefirm
owners,suchashiringthroughtheinformalnetworkoffamilyandfriends.
Forbrevitywedeveloptwoindexesthatsummarizeourpersonnelpolicyvariables.Thefirstindexis
theprincipalcomponentofallperformancerelatedmeasures,suchasbonuses,appraisalsandmerit
basedpromotions.Thevariableisincreasingintheintensityofuseofperformancerewards.Welabel
this“PerformanceIndex”.
Thesecondindex,whichwelabel“FidelityIndex”,capturestheimportanceofgoodpersonal
relationshipwiththeownersofthefirmfortheprofessionalcareerofthemanagers.Thisisdefined
astheprincipalcomponentfactorofthevariablesrecordingtheroleofpersonalrelationshipwith
theownersforpromotionandfiringdecisions,andthecasesinwhichthemanagerwashired
throughpersonal(familyorfriends)contacts.The“FidelityIndex”ishigherforfirmsthatrelymore
heavilyonpersonalcontactsandrelationshipswiththeowners.
Table8andTable9showsummarystatisticsofthetwoincentiveindexes.InTable8,movingfrom
the25thtothe75thpercentileoftheperformanceindexcoincideswithanincreaseintheprobability
ofhavinganexplicitincentiveschemeandwiththeproportionofthebonus,whichgoesfrom9.48%

24
to16.70%ofthesalary.Thereisalsoasignificantincreaseintheprobabilityofhavingaformal
appraisalsysteminplace(from23%to75%ofthefirms)andaslightincreaseintherelevanceofthe
appraisals.Table9reportsasimilarexerciseforthefidelityindex.Movingfromthe25thtothe75th
percentileofthevariableimpliesasignificantincreaseinthefrequencyofmanagers’leavingdueto
badpersonalrelationshipwiththeowners,adramaticincreaseintheproportionofmanagersbeing
hiredthroughfamilyorfriends,whilethereisnochangeintherelevanceofgoodpersonal
relationshipwiththeownersforpromotions.
6.1 Selection
Westartbyanalyzingwhetherdifferentmanagerialpoliciesattractmanagersthatdiffer
systematicallyonkeycharacteristics,suchaseducationandriskaversion.
Table15showsthatthefidelitymodelandtheperformancemodelareindeedassociatedwith
differentselectionmethods.Performance‐basedfirmshireonthebasisofobservablesignalsof
qualityratherthanpersonalconnections,andhencetheyputapremiumofeducation,both
universitydegreesandexecutivetraining.
Columns1to6inTable15clearlyindicatethatmanagerswhoarehiredbyfirmswithhigh
performanceindexesaremorelikelytohaveacollegedegreeandmorelikelytohavecompleted
executiveeducation.
Performance‐basedincentiveschemeinvolvesacertainrisk,becauseitrewardssuccessand
punishesfailure.Highlyrisk‐averseindividualsprefertoworkforfidelity‐basedfirms.Columns7to9
inTable15supportthisconjecture.Riskattitudesarestronglylinkedwiththematchingofmanagers
tofirms.Morerisk‐tolerantmanagersarefoundinfirmswithhigherperformanceindexes.For
example,fromcolumn(9)wecanseethatastandarddeviationchangeintheperformanceindexis
associatedwitha9.1%standarddeviationchangeinthevariablerisk.Ontheotherhandthefidelity
indexmeasuretypicallyenterstheregressionwithmuchsmallerandinsignificantcoefficients.
Itisinterestingtoknowthat–withtwoexceptionstobediscussedshortly–firmownershipisnot
correlatedwiththemanagers’riskaversioncoefficientsincolumn(9).Thismeansthatfirm‐specific
differencesappeartoworkonlythroughthechoiceofincentiveschemes.
Thetwoexceptionstothelaststatementaremanager‐ownedfirmsandItalianmultinational:they
bothseemtoattractmorerisk‐tolerantindividuals.Whileforthefirstexceptionthereisanobvious
explanationthathastodowiththeequitystake,thereasonbehindthesecondexceptionisnotclear.
6.2 Effort
Next,weanalyzetheimpactofdifferentpersonnelpoliciesonmanagerialeffort.Tomeasureeffort
weaskedmanagershowmanyhoursaweektheyworkandhowoftentheyworkovertheweekend.
Table6showsthattheaveragemanagerworks54hoursperweekandworksalittleoveraweekend
amonth.
Table14revealsthattheincentivepolicyofthefirmaffectsmanagers’effort.Managerswithhigher‐
poweredincentivesworklongerhoursandaremorelikelytobeatworkovertheweekend.For
example,onestandarddeviationchangeintheperformanceindexvariableisassociatedwith1.3

25
morehoursworkedperweek(2.3%ofmeanhoursworked)and0.08moreweekendsworkedper
month(8%ofmeannumberofweekendsworked).Forhours,thecoefficientsonthetypeofthefirm
arenotsignificantlydifferentfromzero,indicatingthattheonlyeffectthatthetypeoffirmhasis
throughtheincentiveschemeoffered.Insteadinthecaseofweekends,thereisadirecteffect:
managersinmultinationalsandfirmswithfamilyCEOsaresignificantlylesslikelytoshowupon
weekends.
Interestingly,managers’effort(bothintermsofhoursandweekendsworked)isnegatively
correlatedwiththefidelityindex.Astandarddeviationchangeinthevariableisassociatedwitha
declineofalmostonehourworkperweek,andadeclineof0.05weekendsworkedpermonth.
Othervariablesthataffecteffortare:functionalarea(highereffortinsales,andpartlygeneral
management),nationality(foreign‐bornmanagersputinmorehours),andgender(menaremore
likelytoworkweekends).Contrarytowhatonemightexpect,youngermanagersdonotseemto
workharder.
6.3 UseofTime
Ourfindingsindicatethatmanagerswhoworkforfirmsthatrewardonthebasisof
performancetendtoworkmorehoursperweek.Akeyquestioniswhethertheyessentially
domoreofthesametypeofworkorwhethertheir“style”differssubstantially.Inthis
sectionwedescribeandanalyzeasurveythatwaspurposelydesignedtocollectdetailed
informationonthemanagers’useoftime.
6.3.1 DataDescription
OurquestionnairecontainsdetailedinformationontheCEOuseoftimeeverydayoverafivedays
week.Thisallowsustocomputethenumberofhoursworkedinaweek,thenumberofactivities
performedandtheallocationoftimeacrossdifferenttypesofactivities.
Figure24showsthatmostCEOsworkbetween40and60hoursperweek,withanaverageof47.8.
Figure25showsthatthistimeisdividedacrossseveralactivities.TheaverageCEOsengagesin35
differentactivitiesperweek,namelyabout7perday.Thereishoweversubstantialvariationinthe
numberofactivitiesperformedbydifferentCEOs.Atoneendofthedistribution,the5%ofCEOson
thelefttailengagesin20activitiesperweek,attheotherend,the5%ofCEOsontherighttailofthe
distributionengagesin54differentactivitiesperweek.
Figure26showsthatmostactivitieslastbetween50and100minutes,withanaverageofjustunder
oneandahalfhours.TakentogetherFigure25andFigure26showthatthevariationintotalhours
workedisexplainedmostlybyalargernumberofactivities.Namely,CEOswhoworklongerhours
engageinmoreactivitiesratherthandevotinglongertoasimilarnumberofactivities.
Figure27showshowCEOsallocatetheirworkinghoursacrossdifferenttypesofactivities.CEOs
spendhalfoftheirtimeinmeetings,withtheaveragemeetinglastingjustoveroneandahalfhours
(94.5minutes).Theanalysisofindividualobservationsrevealssubstantialvariationacrossdifferent
CEOs.Forthe5%ofCEOswhoengageinthefewestmeetings,theseonlytake26%oftheirtime,On
theotherhand,the5%ofCEOsthatengageinthemostmeetings,devote76%oftheirtimetothese.
Thesecondmostcommonactivity,taking14%oftheaverageCEOtimeis“workingalone”,an
umbrellatypeactivitythatbringstogetherallworkingtaskstheCEOperformsalone,suchasreading

26
documentsorpreparingmaterialsforameeting.Forthisactivitytoowenotethatthereis
substantialvariationacrossdifferentCEOs.Atthebottomofthedistribution,5%ofCEOsspendno
timeworkingalone.Atthetop,5%oftheCEOsspend36%oftheirtimeworkingalone.Thethird
mostcommonuseoftimeistravel,withanaverageshareof12%.Theremaining25%oftimeis
almostequallysplitbetweenphonecalls,videoandteleconferences,participationtopublicevents
andbusinessluncheons.AlloftheseexhibitsubstantialvariationacrossdifferentCEOs.
Asdiscussedinsection3.2thequestionnairecollectsdetailedinformationonalltheactivitiesthe
CEOwasengagedinforlongerthan15minutes.Forthese“main”activitiesweknowthenumberof
participants,theirtype,thelocation,theplanninghorizonandthefrequency.Wedescribethis
informationinFigure28.Foractivitiesthatinvolveotherparties,weclassifytheseas“insiders”if
they’reemployeesofthefirmand“outsiders”iftheyarenot.Activitiescanbeundertakenalone,
withinsiders,withoutsidersorboth.Onaverage,CEOsspend62%oftheirtimewithinsidersand
38%withoutsiders.Amonginsiders,CEOsonaveragespendmostoftheirtimewithrepresentatives
offinance(16%)andmarketing(15%).Amongoutsiders,thetwotopcategoriesareconsultants
(22%)andclients(15%);interestingly,CEOsspendanequalamountoftimedealingwithfinancial
intermediariesandpoliticians,whichabsorbeach7%oftheirtime.
Notsurprisingly,mostoftheCEOs’activitiestakeplaceatthefirms’headquartersratherthanin
otherlocations.CEOsindeedspendtwothirdsoftheirtimeattheheadquarters.Afurtherquarteris
equallydividedbetweentimespentinotherofficesoftheirfirmandinotherfirmslocatedinItaly.
Theremaining6%isspentabroad.
Figure29showsthatCEOsdevotehalfoftheirtimetoactivitiesthatarenotheldregularly.The
remaininghalfisalmostequallysplitbetweenactivitiesthatareheldweekly,monthlyandannually.
Figure30showsthatifotherpartiesareinvolved,theretendstobeonlyafewofthem.Onaverage,
CEOsspend80%oftheirtimeinactivitiesthatinvolvefewerthan10people,andhalfofthisisspent
onactivitiesthatinvolveonly1or2participants.
Figure31showsthatmostoftheCEOstimeisspentinactivitiesthatarenotplannedfarinadvance,
namelyforoneweekorless.Interestingly,about1/5thoftheCEOs’timeisdevotedtoactivitiesthat
arenotplannedatall.
6.3.2 DoCEOsofDifferentAgeCohortsUsetheirTimeDifferently?
WeuseregressionanalysistoinvestigatewhetherCEOsofdifferentagecohortsdiffersystematically
inhoursworkedanduseoftime.Westatethatwefindevidenceofdifferencesbyageonlywhenwe
canrejectthehypothesisthattheestimatedcoefficientofageisequaltozeroatthe90%confidence
levelorhigher.
WefirstaddressthequestionofwhetherCEOsworklongerhours,eitherbecausetheyengagein
moreactivitiesorspendlongertimeoneachactivity.Theanswertoallthreequestionsisnegative.
Wedonotfindastatisticallysignificanteffectofageoneithervariable.Themagnitudeofthe
estimatedeffectsisverysmall.Forinstancewefindthatcomparedtoa54yearsold(theaverageage
ofCEOsinthesample)a64yearsoldworks20minuteslessperweeks,isengagedinonelessactivity
andspends2moreminutesoneachactivity.
Next,weanalysewhetherageaffectstheallocationoftimeacrossdifferenttypesofactivities.This
andallotherresultsarereportedinTable7.

27
Wefindthatforthemainactivities,thatismeetings,travelsandtimespentworkingalone,CEOsof
differentcohortsbehavesimilarly.Weonlyobservesomevariationintheuseofcommunication
devices.YoungerCEOsusevideoandteleconferencingmorefrequentlyandphonecallsless
frequentlycomparedtotheiroldercounterparts.Thedifferenceissubstantial:theshareoftime
spentonvideoandteleconferencingistwiceaslargeforCEOswhoaretenyearsyoungerthan
average(44yearolds)comparedtoCEOswhoaretenyearsolderthanaverage(64year‐olds).
Aratherinterestingpatternemergeswhenwecomparetheshareoftimespentwithdifferent
categoriesofpeople.OlderCEOsspendrelativelylesstimewithinsiders,especiallywiththose
belongingtotheareasofmarketingandfinance.TheestimatesindicatethataCEOswhoistenyears
youngerthanaveragespends21%ofhistimewithfinanceand20%withmarketingrepresentatives.
Thisdifferencecanreflectdifferencesinmanagerialstylesacrosscohortsoramorepronounced
needtocollectinformationaboutthefirmbymeetinginsidersforyounger,lessexperienced
managers.Incomparison,thesamefiguresforaCEOwhoistenyearsolderthanaverageare15%
and12%.Incontrast,wefindthatCEOsofdifferentagesallocatetheirtimeacrossdifferent
categoriesofoutsidersinasimilarway.
OuranalysisalsorevealsthatyoungerCEOsarealsomorelikelytospendmoretimeatthefirm’s
headquartersratherthanatotherfirms’sites.Thedifferencesbetweena44anda64yearsoldCEO
is12percentagepoints.
Finally,wefindnoevidencethatageiscorrelatedwiththefrequencyatwhichactivitiestakeplaceor
thetimehorizonoverwhichtheyareplanned.Regardlessoftheirage,CEOsdevotethemajorityof
theirtimetoactivitiesthatarenotheldregularlyandareeitherunplannedorscheduledinfora
weekorless.
6.3.3 DoCEOswhoWorkLongerHoursUsetheirTimeDifferently?
ThefinalpartofouranalysisaimstoestablishwhetherCEOswhoworklongerhoursexhibita
systematicallydifferenttimeusepattern.Asintheprevioussectionweemployregressionanalysis
andwestatethatwefindevidenceofdifferencesonlywhenwecanrejectthehypothesisthatthe
estimatedcoefficientofweeklyhoursisequaltozeroatthe90%confidencelevelorhigher.All
resultsarereportedinTable7.
Theanalysisoftimespentondifferenttypeofactivitiesrevealsastrikingdifferenceonthedivision
betweenmeetingsandtimespentworkingalone.CEOswhoworklongerhoursspendrelativelyless
timeinmeetingsandmoretimeworkingalone.TheestimatesindicatethataCEOwhoworks10
hourslongerthanaverageperweekspends56%ofhistimeinmeetingsand18%workingalone.In
comparison,aCEOwhoworks10hourslessthanaverageperweekspends64%ofhistimein
meetingsand12%workingalone.
Differencesalsoemergewhenwecomparetheshareoftimespentwithdifferentcategoriesof
people.CEOswhoworklongerhoursspendrelativelylesstimewithoutsiders.Theestimatesindicate
thataCEOwhoworks10hourslongerthanaverageperweekspends35%ofhistimewithoutsiders.
Incomparison,aCEOwhoworks10hourslessthanaverageperweekspends47%ofhistimewith
outsiders.ThedifferenceismostlydrivenbythefactthatCEOswhoworklongerhoursspend
relativelylesstimewithconsultants.TheestimatesindicatethataCEOwhoworks10hourslonger
thanaverageperweekspends19%ofhistimewithconsultants,whereasthisshareincreasesto27%
forCEOswhowork10hourslessthanaverage.

28
Theanalysisrevealsnosignificantdifferenceinthefrequencywithwhichactivitiesareheldandin
theirgeographicallocation.RegardlessofthelengthoftheirworkingweekCEOsspendmostoftheir
timeonactivitiesthatdonottakeplaceregularlyandarelocatedatthefirm’sheadquarters.
TheanalysishoweverindicatesthatCEOswhoworklongerhourstendtomeetwithmorepeopleat
anygiventime.TheestimatesindicatethataCEOwhoworks10hourslongerthanaverageperweek
spends34%ofhistimeinactivitiesthatinvolveoneortwopeopleinsteadofactivitiesthatinvolve
threeormore.Incomparison,aCEOwhoworks10hourslessthanaverageperweekspends43%of
histimeinactivitiesthatinvolveoneortwopeopleonly.
Theothersignificantdifferenceconcernstheplanninghorizon.Overall,CEOsspendmostoftheir
timeonactivitiesthathavebeenplannedforaweekorless,butCEOswhoworklongerhoursspend
relativelymoretimeonunplannedactivities.ACEOwhoworks10hourslongerthanaverageper
weekspends22%ofhistimeinunplannedactivities,whereastheseonlytake16%ofthetimeof
CEOswhowork10hourslessthanaverageperweek.
6.4 CompensationandJobSatisfaction
Thenextstepofouranalysisinvestigateswhetherdifferentmanagerialsystemsareassociatedwith
differentlevelsofpayandjobsatisfaction.
TheaverageyearlyfixedsalaryinourManageritaliasampleisalittlelessthan100,000euros.Aswe
sawinsection5.2.3,theaveragebonusamountstoabout15%ofthefixedsalary.InTable14,
columns4to6showthefixedcompensationthatthemanagerreceives(fixedsalarybutnotbonus)
asafunctionoffirm‐specificvariablesandworker‐specificvariables.Themostinterestingvariable
fromourviewpointistheincentivepolicy,whichappearswithapositiveandsignificantcoefficient.
Thismeansthatfirmswhoprovidehigh‐poweredincentiveschemesmustcompensatemanagersfor
theadditionalrisktheyincur.Accordingtotheregressionresultsincolumn(6),astandarddeviation
increaseintheperformanceindexisassociatedwithacostofapproximately€5,700(5.7%ofthe
meansalary).Interestingly,thefidelityindexappearswithaninsignificantcoefficientinthesalary
regression.Thedifferencebetweenthetwoindexesisstatisticallysignificant,indicatingthat
managerswhoarerewardedforperformancearepaidmorethanthosewhoarerewardedfor
fidelity.
Firmownershipdoesnothaveadirecteffectoncompensation,exceptfortwosmallercategories:
other(governmentandcooperativepayless)andmanager‐owned(whichpaymore).Asbeforethis
meansthatthetypeofthefirminfluencescompensationonlythroughthechoiceoftheincentive
scheme.Age,educationandseniorityplayapositiverole.Theredoesnotseemtobegender
discrimination.
Wherearemanagershappiest?Accordingtocolumn9,Table14,onlythreevariablesaresignificant.
Managersatmoreseniorlevelreporthigherjobsatisfaction.Forexample,goingfrommiddletotop
managersisassociatedwitha8.5%increaseinjobsatisfaction.Managerswhoarefamilymembers
appeartobehappiertoo,andthiseffectisverystrong(33%increaseaccordingtocolumn9).
Interestingly,explicitincentivesappearwithapositiveandsignificantcoefficientinthejob
satisfactionregression(0.051significantatthe5%level),whilethefidelityindexmeasureenterswith
anegative(albeitinsignificant)coefficient.Thismayreflectexcessdemandformanagerialjobsthat
providehighpoweredincentives,namelyifmanagerswithlowpoweredincentiveswerefully

29
compensatedalongotherdimensions‐e.g.shorterworkinghours‐weshouldnotobservea
differenceinthelevelofreportedjobsatisfaction.

6.5 ManagerialPoliciesandFirmPerformance
Previousstudies(e.g.BloomandVanReenen,2007)showthatbettermanagedfirmstendtobe
moreproductive,growfasterandprovidehigherreturnsoncapitalemployed.Inthissection,we
quantifytheeconomicrelevanceoftheperformanceandfidelityindexesbuiltusingthe
Manageritaliasurvey.
Forthispurpose,weanalysetheconditionalcorrelationoftheperformanceindexwithahostoffirm
levelaccountingvariables.22TheresultsofthisexercisearesummarizedinTables16and17.
Welookatseveraloutcomemeasures:a)3yearssalesgrowth,b)3yearsemploymentgrowth,c)
returnoncapitalemployed(ROCE).Inthesetables,errorsareclusteredatthefirmleveltoaccount
forautocorrelationpatternsofunknownformsintheresiduals.
Thecorrelationsbetweenthegrowthmeasuresandtheincentivevariablearegenerallypositiveand
significant,especiallywhenwelookatthe3yearsgrowthratesofsalesandemployment.For
example,inTable16,column4,aonestandarddeviationincreaseintheperformanceindexmeasure
isassociatedwithapositiveincreaseof0.041percentagepointsin3yearssalesgrowth(this
correspondstoa14%increaserelativetothemean).Similarly,inTable17,column8,aonestandard
deviationincreaseintheperformanceindexmeasureisassociatedwithapositiveincreaseof0.045
percentagepointsin3yearsemploymentgrowth(thiscorrespondstoa24%increaserelativetothe
mean).Incentivesarealsoalwayspositivelyassociatedwiththereturnoncapitalmeasure(Roce).
Forexample,column(4)ofTable17suggeststhataonestandarddeviationincreaseinthe
performanceindexisassociatedwithanincreaseof2.9percentagepointsintheRocemeasure(12%
relativetothemean).
Interestingly,thefidelityindexistypicallyuncorrelatedwithanyofthevariablesconsideredinthis
exercise.Forexample,inTable17,column4,thecoefficientonthefidelityindexis‐0.004,witha
standarderrorof0.013.Asimilarpictureemergeswhenwelookatemploymentgrowthandreturn
oncapitalemployed.
Finally,wedidnotfindevidenceofapositivecorrelationbetweenlabourproductivityandanyofour
incentivesorfidelityindexes.Thismaywellreflectthelackofanystatisticalcorrelationbetweenour
summarymeasuresandproductivity,aswellastheproblematicmeasurementofproductivityinthe
servicesector.

22ThesearedrawnfromtheAmadeusdatabase.SeeBloom,SadunandVanReenen(2008)fordetails.We
wereabletomatch569(oftheoriginal603)firmswithAmadeus,Theperiodcoveredbytheaccounting
datasetgoesfrom2000to2005.Allregressionsareclusteredatthefirmleveltocorrectforserialcorrelationof
unknownformandincludethreedigitsSICdummies.

30
7 Conclusions
Accordingtoourdata,theperformancemodelisassociatedtobetteroutcomesthanthefidelity
model.Thisistrueforselection:managersaremorequalifiedandmoreabletobearrisk.Itisalso
trueformanagers’behaviourtheworkplace:theyarepaidbetter,theyworkharderandtheyare
happier.And,itisalsotrueforfirms:theygrowfasterandtheyhavehigherreturnoncapital.Ifthat
isthecase,whydon’tallfirmsmovetotheperformancemodel?
Therearetwomainlinesofexplanation,dependingonwhetheronethinksthatfirmsthatare
currentlyrelyingonthefidelitymodelareunwillingorunabletoswitchtotheperformancemodel.
Thefirstexplanationhastodowithcorporategovernance.Accordingtoit,theownersofsomefirms
donotpursueonlycommercialsuccess.Theyhaveotherobjectivesaswell,likecorporatecontrol:
theyarewillingtosacrificeprofitsinordertomaintaintheirgriponthefirm.Aclassicalcaseisthat
ofthefamilyfirm,wheretheownersmaywanttoreservesomeofthebestjobsforfamilymembers,
eveniftheyarenotthemostqualifiedapplicants.Insuchfirms,securingthefidelityof(non‐family)
managersisessential.Partoftheirinformaljobdescriptionistonurtureandassistfamilymembers.
Asthistaskisdifficulttomeasure,formalassessmentsareeschewedandrewardsarebasedonthe
long‐termdisplayoffidelity.
Thesecondexplanationrelatestocorporateculture.Firmsmayrealizethattheyarenotoffering
managerstherightincentivesystem,buttheyareunabletoswitchtotheperformancemodel.
Recruiting,assessing,andrewardinghigh‐levelprofessionalssuchasmanagersarenottrivialtasks.
Theypresupposeacorporateculturebasedonexplicitlong‐termplanningandfocusedonhuman
capitaldevelopment.Itispossiblethatsuchknow‐howislackinginfamilyfirmsanddomesticfirms
(althoughoursizecontrolsshowthatitisnotjustanissueofdimension).Theculturalexplanation
maybeparticularlyapplicabletothedifferencebetweenmultinationalanddomesticfirms.Thefact
thatItalianfirmswhooperateinothercountriesseemtobeabletoadoptaperformancemodelmay
indicatethatthekindofcorporateculturethatisneededfordoingbusinessinaninternational
environmentisalsoconducivetobetterincentivesystems.
Ourtwopotentialexplanationshavedifferentpolicyimplications.Ifthegovernancestoryis
predominant,oneshouldquestiontheownershipmode.Thereisalreadyaflourishingdebate(see
literaturereview)ontherelativemeritsoffamilyfirms.Ourresultswouldthenaddtothedebateby
showingthatononedimension–managerialtalent–familyfirmsareatadisadvantage.
Ifinsteadonebelievesmoreintheculturalstory,thentherearetwoimplications.First,weshould
welcomeforeignmultinationals(oratleaststopmakingtheirlifedifficult)andweshouldencourage
ourfirmstoacquireaninternationaldimension.Second,weshouldinvestincreatingtheknow‐how
thatisnecessaryforimplementingtheperformancemodel.Howsuchknowledgecanbeacquiredis
anopenquestion,butitislikelytoberelatedtotheroleofeducation.
OneofthestrikingresultsofourresearchisthelowlevelofeducationofItalianmanagers.Inother
countries,especiallytheUnitedStates,academehasplayedatremendousroleinshapingthe
behaviouroftoday’smanagers.Topuniversitieshaveinvestedlargeamountsofresourcesin
developingbusinessschools.Fordecades,therehasbeenafeedbackcyclebetweenuniversityand
business:businessschoolprofessorsresearchissuesofinteresttobusinessandfuturemanagers
attendMBAcourses.

31
SuchfeedbackloopseemstobemuchweakerinItaly.Universitieshaveinvestedlessinbusiness
programs,whichisreflectedininternationalrankings.AccordingtotheFinancialTimes2008survey,
thebestItalianMBAprogramisranked48thintheworld(incomparison,thebestUKprogramis2nd,
thebestFrenchprogramis6th,thebestSpanishoneis7th).TheFTalsoranksthebest40European
masterprogramsinmanagement:noneofthemisItalian.23
Itisunclearwhetherthemissinglinkisduetothedemandside(Italianfirmsdonothire
managementgraduates,perhapsbecauseofthegovernancereasonsdiscussedabove)ortothe
supplyside(Italianuniversitiesareunabletocreateeffectiveprograms).Certainly,itissurprising
that,withintheexistingpoolofItaliangraduates,firmsdonotappeareagertohiremanagerswho
haveearnedtopmarksduringtheiruniversitycareer.
WhatfutureawaitstheItalianmanagerialclass?Ouranalysisrevealstwocontrastingtrends.Onthe
onehand,thefactthatthereisnosystematicagedifferencebetweenmanagerswhoarerewarded
forperformanceandmanagerswhoarerewardedforfidelity,indicatesthatanewgenerationof
fidelity‐orientedmanagersisbeingtrained.Onlytimewilltellwhetherthisgenerationisableto
tacklethechallengesthattheItalianproductivesystemfaces.
Ontheotherhand,performancebonuseshavebecomemuchmorerelevantinthelastdecade,and
onemightexpectthistrendtocontinue,possiblymatchedbysimilarincreasesinothercomponents
oftheperformancemodel,suchashiringandfiringpracticesbasedexclusivelyonindividual
performance.Inaddition,ourevidencedoessuggestthatItalianfirmswithglobalexposuretendto
abandonthefidelitymodel.Totheextentthattheprocessofglobalizationwillencouragemore
domesticfirmstooperateabroad,orequivalently,willselectonlyfirmsthatareabletooperatein
foreignmarkets,wecanexpecttheperformancemodeltoprevail.


23Thingsarebetterinexecutiveeducation.Bocconi’sprogramisranked5thinEuropeand15thintheworld.

32

8 References
• J.Abowd,F.Kramarz,S.Roux(2006),Wages,Mobility,andFirmPerformance:Advantages
andInsightsfromUsingMatchedWorker‐FirmData,EconomicJournal,116,245‐285
• RenéeB.Adams,HeitorAlmeida,DanielFerreira.PowerfulCEOsandTheirImpacton
CorporatePerformance.ReviewofFinancialStudies200518(4):1403‐1432.
• GeorgeBaker;MichaelGibbs;BengtHolmstrom.TheInternalEconomicsoftheFirm:
EvidencefromPersonnelData.TheQuarterlyJournalofEconomics,Vol.109,No.4.(Nov.,
1994),pp.881‐919.
• GeorgeBaker;MichaelGibbs;BengtHolmstrom.TheWagePolicyofaFirm.TheQuarterly
JournalofEconomics>Vol.109,No.4(Nov.,1994),pp.921‐955.
• MortenBennedsen,FranciscoPérez‐González,DanielWolfenzon.“DoCEOsMatter?”
Workingpaper2007.
• OrianaBandiera,IwanBarankayandImranRasulIncentivesforManagersandInequality
amongWorkers:EvidencefromaFirmLevelExperimentQuarterlyJournalofEconomicsMAY
2007
• MarianneBertrandandAntoinetteSchoar.TheRoleofFamilyinFamilyFirms.TheJournalof
EconomicPerspectives,Volume20,Number2,Spring2006,pp.73‐96(24)
Surveyonfamilyfirms
• MarianneBertrandandAntoinetteSchoar."ManagingwithStyle:TheEffectofManagerson
FirmPolicies.";QuarterlyJournalofEconomics,2003,118(4),pp.1169‐208.
• NickBloom,RaffaellaSadunandJohnvanReenen.“MeasuringandExplaining
DecentralizationacrossFirmsandCountries.”LSEmimeo,2008.
• MikeBurkart;FaustoPanunzi;AndreiShleifer.FamilyFirms.TheJournalofFinance>Vol.58,
No.5(Oct.,2003),pp.2167‐2201
• VicenteCunatandMariaGuadalupe.HowDoesProductMarketCompetitionShapeIncentive
Contracts?JournaloftheEuropeanEconomicAssociation‐Volume3Issue5,September
2005
• DominiqueDemouginandAloysiusSiow.CareersinOngoingHierarchies.TheAmerican
EconomicReview>Vol.84,No.5(Dec.,1994),pp.1261‐1277.
• Doeringer,PeterB.andPioreMichaelJ.(1971).InternalLaborMarketsandManpower
Analysis.Massachusetts.

33
• CarolaFrydmanandRavenSaks.ExecutiveCompensation:ANewViewfromaLong‐Run
Perspective,1936‐2005
• CarolaFrydman.RisingThroughtheRanks.TheEvolutionoftheMarketforCorporate
Executives,1936‐2003.
• RobertGibbonsandMichaelWaldman.CareersinOrganizations:TheoryandEvidence.
Chapter36inVolume3BofO.AshenfelterandD.Card(eds.),HandbookofLaborEconomics,
NorthHolland,1999.
• MichelaGambaandAndreaGoldstein.Thegenderdimensionofbusinesselites:Italian
womendirectorssince1934.Workingpaper,2008.
• JohnR.GrahamandCampbellR.Harvey"Thetheoryandpracticeofcorporatefinance:
Evidencefromthefield,"withJohnGraham,JournalofFinancialEconomics60,(2001):187‐
243.
• StevenN.Kaplan,MarkM.Klebanov,andMortenSorensen.WhichCEOCharacteristicsand
AbilitiesMatter?Workingpaper,April2007
• LaPorta,R.,LopezdeSilanes,L.andShleifer,A.,“CorporateOwnershiparoundtheWorld”,
JournalofFinance,Vol.54,1999,pp.4711‐517.
• EdwardP.LazearandPaulOyer.InternalandExternalLaborMarkets:APersonnel
EconomicsApproach,with,LabourEconomics,11,October2004,527‐554.
• FrancescoLippiandFabianoSchivardi(2007)“Barrierstoriches:socialnetworksvs.
productivity”Mimeo,EIEFRome
• FredLuthans.Successfulvs.EffectiveRealManagers.TheAcademyofmanagement
EXECUTIVE,Vol.2,n.2,127—132,1988.
• KevinJMurphyandJanZabojnik."ManagerialCapitalandtheMarketforCEOs",mimeo,
October2003)
• AndreaPratandRaffaellaSadun.“Unagerontocraziasolopresunta”,LaVoce,June2006
• RaghuramRajanandJulieWulf.TheFlatteningFirm:EvidenceontheChangingNatureof
FirmHierarchiesfromPanelData,ReviewofEconomicsandStatistics,88(4):759‐773,2006.
• JamesD.Westphal.CollaborationintheBoardroom:BehavioralandPerformance
ConsequencesofCEO‐BoardSocialTies.TheAcademyofManagementJournal>Vol.42,No.
1(Feb.,1999),pp.7‐24
• JamesD.Westphal.BoardGames:HowCEOsAdapttoIncreasesinStructuralBoard
IndependencefromManagement.AdministrativeScienceQuarterly>Vol.43,No.3(Sep.,
1998),pp.511‐537

34




Table1:BasicCharacteristics:Managers
VariableFrequencyMeanSD
Age60346.987.12
Male(%)60389.880.30
Degree(%)60350.080.50
Honors(%)30211.920.32

Managers'Fathers
VariableFrequencyMeanSD
Father'sDegree(%)60315.920.37
FatherBlueCollarWorker(%)54521.470.41
FatherTeacher,Retailer,clerk54535.050.48
FatherManager,Entrepreneur54543.490.50

Table2:BasicCharacteristics:Executives,professionalandentrepreneurs(SHIWsample)
Executives
VariableFrequencyMeanSD
Age54042.58921
Male(%)54074.260.44
Degree(%)54030.000.46


Professionals&selfemployed
VariableFrequencyMeanSD
Age46243.9711.17
Male(%)46282.900.30
Degree(%)46234.600.50


Entrepreneurs 
VariableFrequencyMeanSD
Age37444.1411.68
Male(%)37479.680.40
Degree(%)3748.020.27
 
ThedatafromtheSurveyofHouseholdIncomeandWealth(SHIW)poolthelastthreewaves2000,2002and2004andrefer
totheprivatesector.

35


Table3:FamilyOwnershipintheCEPSurvey
ItalyFranceGermanyJapanUKUS
Familyownership(FounderandFamily)622838263228
Founder372333232418
Family25553810





Table4:LabourMarket
Variable FrequencyMeanSD
Managershiredthrough(%):
Professionalcontacts 60352.240.50
Familyorfriends 60320.070.40
Headhunter,hiringagency,advertisment 60326.200.44
Other 6031.490.12
FrequencyofManagerialturnoverdueto:0.00
Poormarketconditions60313.760.34
Problemswithowners 60333.170.47
Failuretomeetobjectives 60326.040.44
Betteroffer 60347.430.50
Personalreasons 60336.150.48
Numberoffirmspreeviouslyworkedbythemanager6030.951.07
Managerreceivedjobofferinthepastthreeyears(%)60370.810.46


36



Table5:FirmCharacteristics

Ownership
Frequency%
Cooperative223.65
DispersedShareholders14724.38
Government274.48
Managers132.16
PrivateEquity315.14
PrivateIndividuals7812.94
Founder11619.24
Family16928.03

FamilyFirms(169)
MeanSD
FamilyCEO(%)0.660.47
Familymembersinmanagement(number)1.831.00

MultinationalFirms
Frequency%
Domestic25542.29
ItalianMNE12520.73
ForeignMNE22336.98

CountryofOriginofForeignMNEs
France 3013.51
Germany 5122.97
Netherlands 135.86
Japan 167.21
UK 167.21
US 6027.03
Other 3616.21
Note:Australia(1),Austria(1),Belgium(7),Denmark(4),Finland(1),Israel(1),SouthAfrica
(1),SouthKorea(1),Spain(3),Sweden(7),Switzerland(5)


ForeignManagers
FrequencyMeanSD
Domestic2550.020.15
ItalianMNE1250.040.20
ForeignMNE2330.070.26


37

Table6:ManagersatWork

Effort
VariableFrequencyMeanSD
WeeklyHoursWorked 60353.717.87
 MonthlyWeekendsWorked 6031.191.10

Promotions
VariableFrequencyMeanSD
Factorsrelevantforpromotions
Tenure 6030.360.48
Performance 6030.950.22
Relationshipwiththeowners 6030.840.37
Fasttracksforstarperformers(%)6030.370.48
Managerspromotedinternally(%)6030.390.49

Remuneration
VariableFrequencyMeanSD
Wage60398963.5229548.15
%FirmswithBonusScheme6030.730.45
PercentageBonus60314.9314.63

Appraisals
VariableFrequencyMeanSD
%FirmswithAppraisals5980.530.50
YearlyAppraisalsFrequency5981.001.29
Appraisalsimportantfor:
Promotions 3230.630.48
Bonus 3230.620.49
Wage 3230.580.49
Firing 3230.430.50
 Other 3230.200.40

JobSatisfaction
VariableFrequencyMeanSD
ManagerisveryHappy(%)6030.500.50


38



Table7:CEOs'UseofTimebyAgeCohortandWorkingHours

             
1234 567
ImpliedValuesfor:ImpliedValuesfor:
DependentVariable: 
Age
Coefficient "Average"
CEO
CEO10
whois
years
younger
than
average
CEO10
whois
years
older
than
average
Hours
Coefficient
CEOwho
works10
more
hoursper
week
than
average
CEOwho
works10
fewer
hoursper
week
than
average


Activities:
TotalNumber‐0.10326.527.525.5.480*31.321.7
(.090)    (.092)   
MeanDuration.2199088.292.2.886* 9981
   (.323)      (.313)    

Shareoftimespentin: 
Meetings‐.002.60.62.58‐.004* .56.64
(.002)    (.002)   
Workingalone .003.15.12.18.003* .18.12
(.002)    (.001)   
PhoneCalls.001*.07.06.08.001.08.06
(.001)  (.001)   
ConferenceCalls‐.002* .05.07.03‐.001 .04.06

(.001)    (.001)   

39





           



Shareoftimespentwith:    
Insiders‐.002.62.64.60.004* .66.58
(.002)  (.002)   
Finance‐.003* .18.21.15‐.001 .17.19
(.002)  (.002)   
Marketing‐.004* .16.20.12‐.002 .18.14
(.002)    (.002)   
             
Shareoftimespentwith:    
Outsiders.002.38.36.40‐.004* .34.42
(.002)    (.002) 
Consultants.000.23.23.23‐.004* .19.27
   (.002)      (.002)    
Shareoftimespentonactivities:            
With1‐2people ‐.003.39.39.36‐.005* .34.43
(.002)    (.003)   
Heldirregularly‐.001.50.51.49‐.002 .48.52
(.003)   (.003)   
Atfirm'sHQ‐.006* .67.73.61.004.71.63
(.002)    (.003)   
Unplanned .002.19.21.17.003* .22.16
   (.002)      (.001)   
CEOs'UseofTimebyAgeCohortandWorkingHours(continued)
Notes:Coefficientsincolumns(2)and(5)areobtainedbyregressingthevariablesincolumn(1)onageandweeklyhoursindeviationfromtheirrespectivemeans.Robust
Standarderrorsarereportedinparenthesis.A*indicatesthatwecanrejectthehypothesisthatthecoefficientisequaltozeroatthe90%confidencelevelorhigher.Columns
(3),(4),(6)and(7)usethecoefficientsincolumns(2)and(5)tocomputethemeanvalueforCEOsofdifferentagecohortsanddifferentworkinghours.Statisticallysignificant
differencesarereportedinred.Forthelastsetofvariablesincolumn(1)theomittedcategoriesare:(i)with3ormorepeople,(ii)heldweekly,monthlyorannually,(iii)heldat
anothersite,anotherfirminItalyandanotherfirmabroad(iv)planned1,2or4weeksinadvance.

40


Table8:PerformanceIndex
Percentile
Performance
Index
Existence
Bonus
Percentage
Bonus
Existence
Appraisals
Fasttracksfor
starperformers

1st‐25th 0.000.000.270.12
26th‐50th 0.869.480.230.31
51st‐75th 1.0016.700.750.34
76th‐100 0.9932.780.860.70


Table9:Fidelityindex
Percentile
Fidelity
Index
Turnover
forbadrelationship
withownership
Hiringthrough
informalcontacts
Importance
ofrelationship
withowners
forpromotions

1st‐25th 0.260.090.00
26th‐50th 0.000.001.00
51st‐75th 1.000.001.00
76th‐100 0.301.001.00



41


Table10:ManagerCharacteristics
(1)(2)(3)(4)(5)(6)(7)
DependentVariableln(Age)Gender
(Male=1)
Nationality
(Foreign=1)
Education
(CollegeDegree=1)
Family
(FamilyManager=1)
Risk
(Principal
Component)
Trust
(GenerallyTrust
People=1)
ln(Employment)0.008*0.007‐0.0000.026‐0.003‐0.0320.005
(0.005)(0.008)(0.006)(0.016)(0.015)(0.032)(0.017)
Area=GeneralAdministration‐0.0160.125***‐0.038‐0.008‐0.0090.1660.142**
(0.017)(0.043)(0.024)(0.063)(0.090)(0.127)(0.065)
Area=SalesandMarketing0.033**0.149***‐0.046*‐0.141***‐0.0730.301***0.123**
(0.016)(0.038)(0.025)(0.054)(0.070)(0.107)(0.055)
Seniority0.063***0.0060.032**0.0620.072‐0.0180.028
(0.013)(0.029)(0.016)(0.049)(0.049)(0.102)(0.050)
Ownership=Internal‐0.035*0.0280.0210.048‐0.0630.023
(0.020)(0.038)(0.028)(0.064)(0.132)(0.066)
Ownership=Other0.0020.009‐0.0040.019‐0.208‐0.009
(0.028)(0.050)(0.033)(0.084)(0.192)(0.092)
MNE‐0.0190.0070.0210.092‐0.161***0.1330.072
(0.018)(0.038)(0.022)(0.060)(0.055)(0.122)(0.059)
USAMNE‐0.0180.0690.020‐0.018‐0.0160.243‐0.038
(0.024)(0.052)(0.038)(0.078)(0.060)(0.161)(0.085)
ItalianMNE0.001‐0.019‐0.005‐0.0740.0680.102‐0.000
(0.020)(0.041)(0.027)(0.064)(0.061)(0.132)(0.065)
Ownership=Founder0.0240.0190.002‐0.044‐ 0.139‐0.015
(0.020)(0.035)(0.028)(0.065)(0.128)(0.067)
Ownership=PrivateEquity0.022‐0.032‐0.001‐0.117‐0.1730.031
(0.031)(0.069)(0.040)(0.109)(0.212)(0.107)
Ownership=Manager0.096**0.016‐0.023‐0.235*‐0.608**‐0.189
(0.042)(0.088)(0.026)(0.141)(0.295)(0.145)
Ownership=PrivateIndividuals0.027‐0.120**0.020‐0.152*‐ 0.0720.034
(0.024)(0.055)(0.032)(0.077)(0.135)(0.075)
Observations603603603603603603603
Dummiesregionsyesyesyesyesyesyesyes
Dummiessectors(sic2)yesyesyesyesyesyesyes

42
Table11:Recruitment,AppraisalandBonuses
(1)(2)(3)(4)(5)(6)(7)
DependentVariableManager
Hired
through
Market
Manager
Hired
through
Familyor
Friends
Presence
of
Appraisals
Yearly
Frequency
of
Appraisals
Importance
of
Appraisals
Presence
ofBonus
ln(Bonus
Percentage+1)
ln(Employment)0.0090.0040.0250.0230.062*0.034**0.078*
(0.014)(0.012)(0.016)(0.041)(0.037)(0.014)(0.043)
Area=GeneralAdministration‐0.0440.017‐0.0120.027‐0.0600.0140.136
(0.056)(0.048)(0.061)(0.154)(0.136)(0.061)(0.184)
Area=SalesandMarketing‐0.090*0.0150.0130.151‐0.0320.108**0.376**
(0.052)(0.042)(0.053)(0.142)(0.120)(0.048)(0.149)
Seniority0.0130.0310.105**0.267**0.301***0.0380.245*
(0.042)(0.037)(0.048)(0.131)(0.111)(0.049)(0.145)
Ownership=Internal‐0.0140.095**‐0.126**‐0.406**‐0.250*‐0.037‐0.174
(0.062)(0.046)(0.064)(0.168)(0.147)(0.054)(0.168)
Ownership=Other0.0080.008‐0.018‐0.1650.087‐0.037‐0.233
(0.084)(0.062)(0.087)(0.230)(0.213)(0.076)(0.227)
MNE0.160***‐0.140***0.224***0.0270.371***0.252***0.739***
(0.054)(0.043)(0.059)(0.147)(0.130)(0.051)(0.154)
USAMNE0.0330.0110.126*0.608***0.454**0.0440.155
(0.081)(0.056)(0.069)(0.204)(0.180)(0.051)(0.180)
ItalianMNE‐0.132**0.042‐0.0630.108‐0.123‐0.087*‐0.294*
(0.057)(0.046)(0.064)(0.156)(0.144)(0.052)(0.162)
Ownership=Founder‐0.046‐0.0120.113*0.463***0.1630.0510.126
(0.054)(0.055)(0.064)(0.177)(0.133)(0.062)(0.185)
Ownership=PrivateEquity0.1360.078‐0.038‐0.0500.0190.0160.211
(0.100)(0.076)(0.109)(0.279)(0.274)(0.074)(0.241)
Ownership=Manager‐0.214***‐0.1100.0100.032‐0.0420.1120.489
(0.067)(0.122)(0.158)(0.316)(0.314)(0.122)(0.417)
Ownership=PrivateIndividuals‐0.0830.0170.120*0.375*0.199‐0.044‐0.160
(0.064)(0.064)(0.072)(0.194)(0.152)(0.067)(0.205)
FamilyManager‐0.331***0.646***‐
 ‐ ‐ 0.1240.254
(0.071)(0.097)  (0.113)(0.380)
Male0.018‐0.064‐ ‐ ‐0.0090.213
(0.062)(0.061)  (0.065)(0.196)
Degree0.032‐0.049‐ ‐ ‐0.0000.011
(0.041)(0.037)  (0.040)(0.126)
ln(Age)‐0.321**‐0.145‐ ‐ ‐‐0.312**‐1.346***
(0.127)(0.131)  (0.135)(0.429)
Observations603.000603.000598598598603603
Dummiesregions**p<0.05***p<0.01"yesyesyesyesyes
Dummiessectors(sic2)  yesyesyesyesyes

43
Table12:PromotionsandDismissals
(1)(2)(3)(4)(5)(6)(7)(8)
Promotionsarebasedon:
Fastracksfor
StarPerformers
(0/1)ManagerDismissalsdueto:
DependentVariablePerformanceTenure
Relationshipwith
Owners 
FailuretoMeet
Objectives
BadMarket
Conditions
BadRelationships
withOwnersBetterOffer
ln(Employment)‐0.001‐0.0140.0010.0060.0110.0080.050***0.046***
(0.005)(0.016)(0.010)(0.017)(0.015)(0.010)(0.015)(0.015)
Area=GeneralAdministration‐0.042‐0.001‐0.0640.129** 0.0770.0370.108*0.073
(0.038)(0.064)(0.047)(0.063)(0.056)(0.049)(0.059)(0.062)
Area=SalesandMarketing0.027‐0.0170.017‐0.002‐0.034‐0.006‐0.0710.028
(0.026)(0.053)(0.039)(0.052)(0.048)(0.041)(0.050)(0.054)
Seniority0.061**‐0.023‐0.0410.077‐0.025‐0.057‐0.084*‐0.086*
(0.029)(0.048)(0.039)(0.049)(0.042)(0.039)(0.046)(0.050)
Ownership=Internal0.011‐0.0310.136***‐0.059 0.0080.008‐0.002‐0.007
(0.023)(0.064)(0.051)(0.063)(0.058)(0.046)(0.063)(0.063)
Ownership=Other‐0.0720.1000.085‐0.111‐0.0020.003‐0.082‐0.033
(0.055)(0.080)(0.066)(0.090)(0.083)(0.066)(0.084)(0.092)
MNE‐0.010‐0.129**‐0.0360.100*0.093*0.0330.0680.129**
(0.024)(0.059)(0.044)(0.058)(0.053)(0.043)(0.054)(0.059)
USAMNE0.0020.0090.006
‐0.0380.281***0.0560.0570.128*
(0.038)(0.075)(0.066)(0.079)(0.077)(0.069)(0.080)(0.077)
ItalianMNE0.026‐0.0110.011
‐0.020‐0.019‐0.0340.003‐0.010
(0.022)(0.062)(0.050)(0.062)(0.059)(0.049)(0.063)(0.065)
Ownership=Founder‐0.005‐0.026‐0.0010.024‐0.059‐0.020‐0.0540.004
(0.022)(0.064)(0.043)(0.061)(0.053)(0.041)(0.060)(0.063)
Ownership=PrivateEquity0.043*0.0430.013‐0.090‐0.0460.146‐0.094‐0.062
(0.025)(0.098)(0.087)(0.097)(0.100)(0.093)(0.105)(0.110)
Ownership=Manager0.074**0.012‐0.357**0.024‐0.090‐0.0680.0540.142
(0.032)(0.167)(0.144)(0.161)(0.139)(0.085)(0.138)(0.148)
Ownership=PrivateIndividuals‐0.077**0.095‐0.0250.103‐0.0230.0600.0230.050
(0.037)(0.073)(0.050)(0.077)(0.065)(0.059)(0.067)(0.076)
Observations603603603603603603603603
Dummiesregionsyesyesyesyesyesyesyesyes
Dummiessectors(sic2)yesyesyesyesyesyesyesyes



44

Table13:Managers’Effort
(1)(2)(3)(4)(5)(6)
DependentVariableMonthlyWeekendsWorked WeeklyHoursWorked
ln(Employment)0.0450.0460.0390.622***0.525**0.611**
(0.034)(0.035)(0.039)(0.219)(0.225)(0.251)
Area=GeneralAdministration0.386***0.384***0.375***2.185**1.722*1.590
(0.133)(0.134)(0.137)(0.996)(0.982)(1.000)
Area=SalesandMarketing0.408***0.391***0.325***2.275***1.979**2.057**
(0.117)(0.120)(0.123)(0.804)(0.809)(0.830)
Seniority0.1210.1080.1151.273*0.9451.275
(0.103)(0.106)(0.110)(0.770)(0.776)(0.779)
Ownership=Internal‐0.224‐0.173‐0.2280.1720.9490.532
(0.138)(0.143)(0.151)(0.973)(0.977)(1.012)
Ownership=Other‐0.212‐0.206‐0.224‐2.903**‐2.553*‐2.188
(0.180)(0.183)(0.194)(1.341)(1.330)(1.390)
MNE‐0.216*‐0.312**‐0.364*** 0.554‐0.1130.239
(0.116)(0.126)(0.135)(0.841)(0.903)(0.941)
USAMNE0.1430.1700.231‐0.906‐1.197‐1.367
(0.176)(0.176)(0.184)(1.114)(1.065)(1.103)
ItalianMNE0.0180.0390.092
‐0.450‐0.488‐0.715
(0.131)(0.137)(0.146)(0.927)(0.936)(0.949)
Ownership=Founder0.0750.0550.0700.3130.2280.437
(0.138)(0.143)(0.150)(0.948)(0.961)(1.035)
Ownership=PrivateEquity0.378*0.363*0.2851.1831.5300.823
(0.211)(0.214)(0.222)(1.578)(1.553)(1.579)
Ownership=Manager‐0.002‐0.057‐0.0240.420‐0.718‐0.576
(0.333)(0.332)(0.356)(2.218)(2.158)(2.118)
Ownership=PrivateIndividuals‐0.065‐0.099‐0.089‐1.098‐1.623‐1.923
(0.146)(0.153)(0.167)(1.174)(1.177)(1.190)
FamilyManager0.4180.2680.290‐0.4100.0180.271
(0.309)(0.329)(0.342)(1.877)(2.005)(2.144)
Male0.286*0.259*0.266*2.632**2.238*2.367**
(0.152)(0.155)(0.161)(1.146)(1.174)(1.204)
Degree0.0070.0330.038‐0.676‐0.867‐1.160
(0.094)(0.095)(0.100)(0.672)(0.674)(0.717)
ln(Age)‐0.272‐0.282‐0.265‐2.542‐1.693‐2.899
(0.325)(0.341)(0.364)(2.236)(2.329)(2.412)
Performanceindex0.101**0.087*  1.340***1.255***
(0.049)(0.051)  (0.345)(0.358)
Fidelityindex‐0.067‐0.055  ‐0.830**‐0.793**
(0.045)(0.047)  (0.323)(0.333)
Observations603603603603603603
Dummiesregionsandsectors(sic2)NoNoYesNoNoYes
 

45

Table14:Managers’PayandJobSatisfaction
(1)(2)(3)(4)(5)(6)(7)(8)(9)
DependentVariableTotalRemuneration(includingbonus)FixedRemuneration(excludingbonus)JobSatisfaction
ln(Employment)1677.553291.984675.6401139.984742.2141180.863‐0.005‐0.009‐0.009
(1039.282)(972.758)(1012.917)(800.033)(824.080)(859.803)(0.014)(0.014)(0.016)
Area=GeneralAdministration2622.465‐1007.859912.858‐1401.542‐2259.954‐509.0910.122**0.1010.127**
(4412.681)(3922.074)(4034.494)(3282.114)(3262.550)(3304.834)(0.061)(0.062)(0.064)
Area=SalesandMarketing‐2147.701‐7077.785*‐6539.979*‐5729.869*‐6998.517**‐6914.487**0.0680.0480.055
(4070.240)(3728.451)(3832.124)(3061.625)(3108.384)(3161.684)(0.054)(0.055)(0.058)
Seniority19456.800***16163.813***15736.888***14502.149***13727.796***13479.937***0.100**0.103**0.084*
(3406.352)(2983.762)(3057.903)(2471.928)(2474.731)(2510.065)(0.046)(0.048)(0.049)
Ownership=Internal‐8560.338*‐4113.656‐4262.425‐4206.103‐2999.643‐3536.649‐0.090‐0.092‐0.074
(4599.136)(4129.261)(4467.523)(3342.019)(3417.218)(3593.425)(0.061)(0.062)(0.067)
Ownership=Other‐14691.226**‐11402.059**‐9937.148*‐9534.613**‐8972.402**‐7829.128*‐0.001‐0.014‐0.001
(5727.036)(5040.234)(5191.117)(4093.013)(4111.802)(4149.371)(0.085)(0.088)(0.094)
MNE7336.900*‐6320.777*‐4999.345950.280‐3947.566‐3362.439‐0.009‐0.056‐0.041
(3779.159)(3721.589)(4094.814)(2835.334)(3056.321)(3376.631)(0.053)(0.056)(0.061)
USAMNE7171.3874624.5002732.5133980.8803717.2521995.0260.006‐0.012‐0.010
(5496.307)(4977.695)(5187.932)(3898.015)(3967.478)(4086.162)(0.079)(0.080)(0.085)
ItalianMNE1452.8307503.192*6885.6474100.7286437.762*6191.936*0.0510.0750.067
(4655.711)(4318.268)(4522.406)(3433.923)(3518.790)(3625.106)(0.059)(0.061)(0.064)
Ownership=Founder2369.650‐3043.072‐3505.458‐112.770‐2078.624‐2112.5380.112*0.109*0.113*
(4540.292)(3898.521)(4003.099)(3400.570)(3339.910)(3408.384)(0.062)(0.064)(0.067)
Ownership=PrivateEquity3060.6352204.5645200.5361185.0791281.2553179.7990.0800.0650.039
(7719.390)(7278.733)(7585.565)(5423.821)(5362.209)(5490.960)(0.100)(0.101)(0.108)
Ownership=Manager38188.260***28697.931***29189.839**23198.848***19979.621***21177.976**0.1880.1480.132
(11651.609)(10589.723)(11709.058)(6946.790)(7367.759)(8224.237)(0.151)(0.153)(0.163)
Ownership=PrivateIndividuals553.990‐1881.988‐148.2911609.338876.6192913.9580.0870.0940.126*
(5188.283)(4918.156)(5437.018)(4183.396)(4361.596)(4729.567)(0.069)(0.070)(0.076)
FamilyManager‐7154.389‐9316.284‐12293.978‐7933.846‐9125.993‐11520.6550.1900.299**0.329**
(11815.280)(12222.198)(12181.738)(7519.558)(8734.683)(8517.786)(0.137)(0.140)(0.148)
Male4626.5052684.0275563.706‐219.093‐302.1262346.2580.0760.0590.069
(5133.846)(5263.647)(5269.523)(4344.420)(4442.634)(4360.962)(0.068)(0.069)(0.071)
Degree12981.695***9976.702***7551.257**10951.248***9772.985***7736.184***‐0.023‐0.037‐0.025
(3270.201)(2981.233)(3205.865)(2375.310)(2428.527)(2567.270)(0.043)(0.044)(0.047)
ln(Age)31196.044***49096.940***50286.047***38942.561***43295.099***45596.989***0.2270.256*0.335**
(10579.254)(10108.055)(10397.360)(7695.317)(8228.588)(8359.445)(0.147)(0.153)(0.161)
Performanceindex18513.147***19089.435*** 5097.190***5735.695***0.048**0.051**
(1564.749)(1577.273)(1296.024)(1300.284)(0.022)(0.023)
Fidelityindex65.3051108.447‐528.117359.006‐0.026‐0.029
(1336.717)(1402.818)(1118.363)(1169.536)(0.022)(0.023)
Observations603603603603603603603603603
Dummiesregionsandsectors(sic2)NoNoYesNoNoYesNoNoYes

46

Table15‐EDUCATIONANDINCENTIVES
(1)(2)(3)(4)(5)(6)(7)(8)(9)
DependentVariableCollegeDegree(0/1)ExecutiveEducation RiskTolerance
         
ln(Employment)0.0190.0170.033** 0.031**0.0240.024 ‐0.015‐0.028‐0.031
(0.014)(0.015)(0.016) (0.015)(0.015)(0.017) (0.029)(0.030)(0.032)
Area=GeneralAdministration‐0.049‐0.047‐0.039 0.0320.0250.003 0.1950.1710.131
(0.059)(0.061)(0.061) (0.060)(0.060)(0.063) (0.121)(0.125)(0.129)
Area=SalesandMarketing‐0.131***‐0.129**‐0.129** 0.0350.0130.008 0.336***0.300***0.307***
(0.050)(0.052)(0.052) (0.053)(0.054)(0.055) (0.104)(0.108)(0.110)
Seniority0.103**0.096**0.121** 0.0320.0120.039 ‐0.006‐0.0110.020
(0.047)(0.048)(0.048) (0.047)(0.049)(0.050) (0.099)(0.102)(0.107)
Ownership=Internal‐0.045‐0.0330.015 0.0200.0360.064 ‐0.0030.0410.048
(0.059)(0.060)(0.063) (0.060)(0.061)(0.062) (0.126)(0.127)(0.132)
Ownership=Other0.0030.0070.023 0.0090.007‐0.012 0.1040.1640.231
(0.079)(0.079)(0.080) (0.083)(0.083)(0.088) (0.188)(0.193)(0.200)
MNE0.0490.0350.065 0.181***0.104*0.154** 0.1370.0970.054
(0.051)(0.055)(0.059) (0.053)(0.058)(0.062) (0.108)(0.122)(0.132)
USAMNE‐0.027‐0.039‐0.046 0.0230.014‐0.019 0.244*0.2260.205
(0.070)(0.071)(0.075) (0.074)(0.074)(0.077) (0.146)(0.152)(0.156)
ItalianMNE‐0.076‐0.073‐0.071 ‐0.166***‐0.137**‐0.175*** 0.0730.1040.130
(0.056)(0.058)(0.060) (0.059)(0.061)(0.062) (0.123)(0.130)(0.133)
Ownership=Founder0.005‐0.015‐0.028 ‐0.063‐0.091‐0.110* 0.1720.1340.149
(0.059)(0.062)(0.064) (0.062)(0.064)(0.066) (0.122)(0.123)(0.128)
Ownership=PrivateEquity‐0.146‐0.140‐0.091 0.196**0.168*0.186** 0.1110.1310.196
(0.093)(0.094)(0.095) (0.089)(0.089)(0.093) (0.196)(0.198)(0.205)
Ownership=Manager‐0.072‐0.114‐0.145 0.032‐0.019‐0.024 0.692***0.680**0.663**
(0.127)(0.124)(0.125) (0.148)(0.149)(0.163) (0.267)(0.274)(0.290)
Ownership=PrivateIndividuals‐0.028‐0.049‐0.117 0.0210.001‐0.020 0.1400.1270.107
(0.068)(0.071)(0.076) (0.070)(0.073)(0.075) (0.125)(0.130)(0.135)
FamilyManager0.0450.001‐0.053 0.076‐0.014‐0.054 ‐0.0150.1280.010
(0.135)(0.145)(0.148) (0.135)(0.154)(0.167) (0.306)(0.307)(0.314)
Male0.110*0.115*0.117* ‐0.019‐0.042‐0.013 0.0790.0680.014
(0.064)(0.068)(0.069) (0.068)(0.070)(0.075) (0.125)(0.127)(0.132)
ln(Age)‐1.000***‐0.980***‐0.974*** ‐0.184‐0.115‐0.123 ‐0.847***‐0.670**‐0.911***
(0.126)(0.136)(0.142) (0.136)(0.144)(0.153) (0.289)(0.300)(0.321)
Degree

0.0160.0110.008


(0.087)(0.090)(0.093)
PerformanceIndex0.0250.018 0.092***0.085*** 0.085*0.090*
(0.022)(0.022) (0.022)(0.023) (0.050)(0.052)
FidelityIndex0.0020.007 0.0110.013 0.006‐0.008

47
(0.022)(0.022) (0.021)(0.022) (0.044)(0.044)
Observations603603603603603603603603603
Dummiesregionsandsector(sic2)NoNoYes
NoNoYes
NoNoYes

48

Table16:ThreeYearsSalesandEmploymentGrowth(2000‐2005)
(1)(2)(3)(4)(5)(6)(7)(8)
DependentVariableSalesGrowthEmploymentGrowth

Performanceindex0.041***0.039***0.042***0.041***0.046***0.046***0.045***0.045***
(0.013)(0.013)(0.014)(0.014)(0.014)(0.015)(0.015)(0.015)
Fidelityindex‐0.005‐0.004‐0.005‐0.0040.0060.0070.0070.007
(0.012)(0.013)(0.013)(0.013)(0.013)(0.014)(0.014)(0.014)
Ownership=Internal‐0.030‐0.032  ‐0.005‐0.005
(0.035)(0.036) (0.037)(0.038)
Ownership=Other‐0.014‐0.017  0.0090.005
(0.062)(0.062)  (0.054)(0.053)
MNE0.004‐0.005   0.0180.015
(0.034)(0.038)   (0.034)(0.039)
USAMNE‐0.024‐0.025   ‐0.033‐0.033
(0.054)(0.053)   (0.054)(0.054)
ItalianMNE‐0.008‐0.001   0.0150.017
(0.035)(0.037)   (0.035)(0.038)
Area=GeneralAdministration0.0050.0090.0030.007‐0.018‐0.017‐0.019‐0.019
(0.037)(0.039)(0.038)(0.039)(0.038)(0.040)(0.039)(0.040)
Area=SalesandMarketing‐0.075***‐0.069**‐0.076***‐0.070** ‐0.054*‐0.053‐0.055*‐0.054
(0.028)(0.029)(0.029)(0.030)(0.031)(0.033)(0.032)(0.033)
Seniority‐0.109***‐0.108***‐0.109***‐0.107*** ‐0.037‐0.037‐0.036‐0.036
(0.029)(0.029)(0.030)(0.029)(0.028)(0.028)(0.028)(0.028)
Observations1992199219921992
1945194519451945
NumberofFirms415415415415445445445445


49

Table17:ReturnonCapitalEmployed(2004‐2005)
(1)(2)(3)(4)
YearinSample2004‐2005

Performanceindex2.458**2.540**2.904**2.900**
(1.151)(1.127)(1.218)(1.203)
Fidelityindex0.0930.047‐0.125‐0.095
(1.191)(1.216)(1.220)(1.230)
Ownership=Internal0.3980.022
(3.562)(3.669)
Ownership=Other2.1111.690
(4.444)(4.468)
MNE‐3.563‐3.653
(3.099)(3.355)
USAMNE2.1092.089
(5.718)(5.765)
ItalianMNE0.2940.397
(3.718)(4.083)
Area=GeneralAdministration4.5794.2924.5384.389
(2.947)(2.958)(2.942)(2.966)
Area=SalesandMarketing3.9943.7623.9303.927
(2.653)(2.769)(2.612)(2.759)
Seniority‐1.905‐1.885‐2.037‐2.055
(2.065)(2.067)(2.145)(2.136)
Observations832832832832
NumberofFirms460460460460

50


Figure1:Age,InternationalComparison
0 10 20 30 40 50
Plant Manager Age
Japan
France
US
UK
Italy
Germany
Source: CEP Survey 




Figure2:Age,ManageritaliaSurvey
010 20 30 40 50
Manager Age
Top Managerment
Middle Management
Lower Management
010 20 30 40 50
Manager Age
Finance, Accounting
Marketing, Sales
General Administration
010 20 30 40 50
Manager Age
Domestic
Domestic MNE
Foreign MNE
010 20 30 40 50
Manager Age
Family Manager
External Manager
Note: Graph based on family firms only
Source: Manageritalia Survey



51










0.02 .04 .06 .08
Fraction
40 50 60 70 80
(mean) age
Figure3:Age,CEOs’agedistribution
Age Distribution (1985-2004)
30
35
40
45
50
55
60
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
10th percentile
25th percentile
Median
75th percentile
90th percentile
Figure4:INPS,AgeProfileoverTime

52
Figure5:Gender,InternationalComparison
0 .02 .04 .06
Percentage of Female Plant Managers
US
UK
Germany
France
Italy
Japan
Source: CEP Survey



Figure6:Gender,ManageritaliaSurvey
0.2 .4 .6 .8 1
Percentage of Male Managers
Finance, Accounting
Marketing, Sales
General Administration
0.2 .4 .6 .8 1
Percentage of Male Managers
Foreign Managers
Italian Managers
0.2 .4 .6 .8 1
Percentage of Male Managers
Other
Family
Managers/Private Equity
Dispersed Shareholders
Private Individuals
0.2 .4 .6 .8 1
Percentage of Male Managers
Family Manager
External Manager
Source: Manageritalia Survey
Note: Graph based on family firms only
Source: Manageritalia Survey


53
Share of Female Managers
0
2
4
6
8
10
12
14
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1999 2000 2001 2002 2003 2004
All
Top 25%
Ratio of Women's Median Total Pay over Men's Median Total pay
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Figure7:INPS‐TheEvolutionofGenderBias

54

Figure8:Education,InternationalComparison
0 20 40 60 80
Percentage of Managers with a College Degree
Japan
Germany
US
France
Italy
UK
Source: CEP Survey 

0 5 10 15 20 25
Percentage of Non Managers with a College Degree
Japan
US
Italy
France
Germany
UK
Source: CEP Survey 


55

Figure9:Education,ManageritaliaSurvey


0.2 .4 .6 .8
% Managers with a College Degree
Finance, Accounting
General Administration
Marketing, Sales
0.2 .4 .6 .8
% Managers with a College Degree
Father Edu: College
Father Edu: Secondary
0.2 .4 .6 .8
% Managers with a College Degree
Business Services
IT
Wholesale
Retail cars
Retail
Travel agencies
0.2 .4 .6 .8
% Managers with a College Degree
Toscana
Lazio
Emilia
Lombardia
Piemonte
Veneto
Source: Manageritalia Survey

56
Figure10:RiskTolerance

-.2 -.1 0.1 .2
Risk Tolerance
Marketing, Sales
General Administration
Finance, Accounting
-.2 -.1 0.1 .2
Risk Tolerance
US MNE
Italian MNE
Other MNE
Domestic Firms
-.2 -.1 0.1 .2
Risk Tolerance
Managers/Private Equity
Private Individuals
Family
Other
Dispersed Shareholders
Source: Manageritalia Survey

57
Figure11:Internationalcomparison:

A.OverallManagementScore
0 1 2 3 4
Overall Management Score
US
Germany
Japan
UK
Italy
France
Source: CEP Survey 

B.DifferenceBetweenOperationsscore,Peoplemanagementscore
-.2 -.1 0 .1
Operations (Physical Capital) Management - People (Human Capital) Management
US
UK
Germany
Japan
Italy
France
Source: CEP Survey 

58


C.PeopleManagementinDetail

01234
Hiring Talent
US
Germany
Japan
France
UK
Italy
01234
Incentives and Appraisals
US
Japan
France
Germany
Italy
UK
01234
Making Room for Talent
US
UK
Germany
France
Italy
Japan
01234
Developing Talent
US
UK
Germany
France
Italy
Japan
Source: CEP Survey 



59
Figure12:Recruitment,ManageritaliaSurvey



















60
Figure13:Appraisals,ManageritaliaSurvey


61
Figure14:Bonus


62
Figure15:Promotions


63
Figure16:ManagerTurnover

64

Total Pay by Firm Size (Median Total Pay, 2004 euros)
0
20
40
60
80
100
120
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Below median size
Above median size
Figure17:INPS‐TheEvolutionofPaybyFirmSize

65

Total Pay
(2004 euros, thousands)
0
50
100
150
200
250
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
10th percentile
25th percentile
Median
75th percentile
90th percentile
Figure18:INPS–ManagerialpayOverTime

66
Share of Managers with a Bonus
0
20
40
60
80
100
120
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Bonus as Percentage of Total Pay
0
5
10
15
20
25
30
35
40
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
10th percentile
25th percentile
Median
75th percentile
90th percentile
Figure19:INPS‐ImportanceofBonusoverTime

67

Share of Managers still Employed as Managers
(base year = 1985 or 1995)
0
20
40
60
80
100
120
0123456789
1995 mgrs
1985 mgrs
Figure20:SurivivalRatesforCohortsofManagers

68

Figure21:PayDynamics(DroppingMissingObservations)
Total Pay Profile of 1985 Managers aged 35-44
(constant euros, 1985 pay =1, drop missing observations)
0.0
0.5
1.0
1.5
2.0
2.5
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
25th percentile
Median
75th percentile
Total Pay Profile of 1995 Managers aged 35-44
(constant euros, 1995 pay =1, drop missing observations
0
0.5
1
1.5
2
2.5
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
25th percentile
Median
75th percentile

69

Figure22:PayDynamics(ReplacingMissingObservationswithZeros)
Total Pay Profile of 1985 Managers aged 35-44
(constant euros, 1985 pay =1, missing set to zero)
0
0.5
1
1.5
2
2.5
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
25th percentile
Median
75th percentile
Total Pay Profile of 1995 Managers aged 35-44
(constant euros, 1995 pay =1, missing set to zero
0
0.5
1
1.5
2
2.5
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
25th percentile
Median
75th percentile

70

Figure23:PayDynamicsforHighFlyers
0.1 .2 .3
Fraction
20 40 60 80
weeklyhrs
Figure24:HoursworkedbysampleCEOs

71

0.1 .2 .3
Fraction
20 40 60 80
weeklyhrs
Figure24:HoursworkedbysampleCEOs
0.05 .1 .15 .2
Fraction
20 30 40 50 60
(sum) totactivities
0.05 .1 .15 .2 .25
Fraction
50 100 150 200
(mean) meanduration
Figure25:CEOs’numberofactivitiesperweek
Figure26:CEOs’meandurationofactivities
Numberofweeklyactivities
Averageactivityduration(minutes)

72










Figure27:CEOs’UseofTime

Meanshareoftotalhours

73




Figure28:CEOs’useoftimebytypeofparticipants
Meanshareoftotalhours
Meanshareoftotalhours

74


Meanshareoftotalhours
Figure29:CEOs’useoftimebyfrequencyofactivity

75





Meanshareoftotalhours
Meanshareoftotalhours
Figure30:CEOs’useoftimebyschedulinghorizon
Figure31:CEOs’useoftimebynumberofparticipants